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Ohio CUs can help as payday-loan caps take effect
DAYTON, Ohio (11/12/08)--Ohio might experience a shortage of payday lenders as a result of the passage of Issue 5--which reaffirms a new state regulation that limits the interest rate charged on cash advances. However, people needing short-term loans can turn to credit unions. According to Dayton Daily News (Nov.7), Issue 5 means that more payday lenders likely will close shop in the state, while consumers strapped for cash will still need short-term loans. One solution is credit unions that offer a stretch pay alternative to payday loans, the Ohio Credit Union League told the paper. Borrowers can get $250 or $500 at 18% annual interest rates through 120 credit union branches that offer stretch pay, said Becky Hart, Ohio Credit Union Foundation executive director. Hart said borrowers must pay off the balance every 30 days and be members of the credit union. If they have trouble paying off the debt, they can obtain budget counseling and personal financial education, Hart added. However, credit unions won't be the solution for everyone with cash problems. "We're not trying to be payday lenders, but we do know it's possible to offer small, short-term loans," Hart said. When the bill was signed into law this summer, 150 of the 1,600 payday lending locations in Ohio closed. After the election, Cashland announced it would close one-third of its 139 locations in Ohio. Advance America, another payday lender, may close if its small loans are unprofitable. Payday lenders charged 391% annual interest rates. The new law limits interest rates on the loans to 28%.
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