Payday loan lenders offer borrowers short-term loans, even if the borrower has little or not credit history, or if his credit rating is poor. These loans are intended to help the borrower pay expenses for just a few days to a month, until the borrower receives his regular income--hence, "payday" loan. If a borrower in Ohio fails to pay back a payday loan, he can be hit with additional fees and may face collection actions.
Payday Loans
Payday loans are notorious for requiring borrowers to pay steep rates of interest and, in the event that the person is late paying the loan back, onerous fees. Often, a person will be charged a late fee for a missed payment. Within several months, a person can end up owing far more on the loan than the amount that he originally borrowed. To prevent borrowers from getting into unmanageable debt, Ohio has laws limiting payday loan practices.
Ohio Laws
In Ohio, as of January 2011, a payday loan lender can only charge a maximum of 5 percent interest per month on a late loan. So, if a loan was a year late, the debtor would owe 60 percent in interest on the loan--far less than the 400 percent commanded by lenders in some states. In addition, lenders can only charge a maximum of $5 per $50 to originate the loan.
Collections
If a person fails to pay back a payday loan in Ohio or elsewhere, the payday loan company may attempt to collect the money, either by itself or through a collection agency. This is because a payday loan is a legally enforceable debt. Although Ohio debtors have only a small chance of being sued by payday lenders, because the maximum size of a payday loan is $500, they may face pressure to pay in the form of phone calls and letters, as well as damage to their credit rating.
"Hot" Check Laws
Some states, including Ohio, make it a crime to pass so-called "hot" checks to merchants. A hot check is defined as a check that the person writing it knows the recipient will not be able to cash, either because the check is not real or the account has no money in it. Many payday loan lenders keep post-dated checks from borrowers, which are cashed when the loan comes due. However, if this check were to bounce, a lender would have to prove that the borrower acted maliciously in order to get him charged with a crime.
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