‘A horrible cycle’ of payday lending: 5 things you need to know

Dayton Daily News reporters Thomas Gnau and Laura Bischoff take an in-depth look at payday lending — and how the high-interest loans are impacting people in the region. Read the full report here to understand what's really going on.

One out of 10 Ohioans have used payday loans to make ends meet, according to a local lawmaker looking to change a system that some people say has ruined their financial lives. Supporters of payday lending say House Bill 123, which passed last week by the Ohio House, will cut off access to money for up to 1 million people in the state.

Here are five things you need to understand about payday lending:

1. TWO SIDES For one side, short-term or payday lending is a legitimate business meeting a real need. For others, these low-dollar loans become expensive life-wreckers. "Essentially these corporations, they're making their profits off the back of poor people," said Cherish Cronmiller, president and chief executive of Dayton's Miami Valley Community Action Partnership, supported HB 123.

» TRENDING NEWS: Payday lending a ‘horrible cycle’ for some Ohioans

2. COSTLY ACROSS THE U.S. Nationwide, some 12 million Americans take out high-cost, small-dollar loans each year, spending $9 billion on fees alone, according to The Pew Charitable Trusts. Pew also says Ohio borrowers on average pay a 591 percent annual percentage rate, the country's highest rate.

3. LOCALS IMPACTED In 2015, Charles Cline of Dayton said he'd been stuck in the payday lending trap. He said he took out a $1,000 loan and ended up paying $1,600, due to extensions, fees and interest. "Trying to help yourself get out of a bad situation, you end up hurting yourself more. They are preying on people that are poor, that are less fortunate, that need to get by throughout the week," said Cline, adding he won't be taking another payday loan.

4. HIGH FINES AND FEES Payday lenders usually charge interest of $15 to $20 for every $100 borrowed, according to the Consumer Finance Protection Bureau. The lenders let borrowers "roll" the debt forward, delaying payment until next month — and saddling borrowers with fees and interest.

5. FILLING A NEED Cheney Pruett, a Texas resident who owns 59 CashMax stores in Ohio — including at least three in the Dayton area — called the bill "fatally flawed."

He acknowledges that some consumers find themselves stuck in cycles of debt, paying refinance fees for too long. But he said few customers find themselves on that “payday hamster wheel,” and his stores offer installment loans. He also said his loans in Ohio run closer to $11 charged for every $100 borrowed.

The Dayton Daily News is committed to bringing you in-depth coverage on topics that matter to you. Read more about the impact of payday lending in your community in this special report.