COLUMBUS, Ohio (CN) - Ohio has more payday lenders than McDonalds, Burger King and Wendy's restaurant combined, and they charge illegal, usurious rates for short-term loans, a class action claims in Federal Court.
Lead plaintiff Elizabeth Burger sued Advance America Cash Advance and a slew of other short-term lenders in a lawsuit replete with alarming statistics about the rapid growth of payday lenders.
Burger claims that payday lenders are governed by Ohio's Short-Term Loan Act (STLA), which they systematically violate by "making loans pursuant to the Second Mortgage Loan Act," to collect more fees and charge higher interest rates.
Burger and co-plaintiff Patricia Martaus claim the lenders from which they obtained short-term loans violated the STLA by charging more than 28 percent interest on loans that were either less than $500 or had a term of less than 31 days.
Page 6 of the 22-page lawsuit describes the explosive growth of the short-term, high-interest loan industry.
It states: "The number of payday lending offices licensed in Ohio grew from 107 in 1996 to 1,562 in 2006. In that year, Ohio had more payday lending locations than McDonalds, Burger King and Wendy's restaurants combined.
"The payday lenders, along with lenders not named as defendants in this action, charged $318,789,535 in fees in 2006, leaving 317,990 borrowers trapped in a cycle of debt.
"From 2008 through January 2013, the number of Ohio residents who have borrowed from the CashNetUSA defendants alone is at least 14,000.
"In 2009, over 4 million unsecured loans were made in Ohio under the Second Mortgage Loan Act, with a total value in excess of $2 billion. ...
"By 2006, every Ohio county except for Ottawa and Vinton had at least one payday lender; 35 counties had more than 10 locations, and nine counties had 40 or more. By 2006, Franklin County had 183, Hamilton County had 123, and Cuyahoga County had 160 payday lender offices. ...
"Just one percent of payday loans go to borrowers who repay within two weeks and borrow less than once a year, while 99 percent go to repeat borrowers. The average borrower takes out nine loans per year."
The plaintiffs seek class certification, declaratory judgment that the defendants' loans are subject to the STLA, and punitive damages for violations of the Second Mortgage Loan Act, the Consumer Sales Practices Act and the Ohio General Usury Act.
The defendants operate by names that include Advance America, Checksmart, Express Consumer Loans, Express Loan Services and CashNetUSA.
The plaintiffs are represented by Jack D'Aurora, with the Behal Law Group.Here are the defendants: Advance America Small Loans of Ohio Inc. dba Advance America Cash Advance Centers dba Advance America Cash Advance dba Advance America; Buckeye Lending Solutions LLC dba Checksmart dba Checksmart Consumer Loans dba Express Consumer Loans dba Express Loan Services; Community Choice Financial Inc.; National Loans LLC; Cash America International Inc dba CashNetUSA; Ohio Consumer Financial Solutions LLC; dba CashNetUSA; Cash America Net Holdings LLC dba CashNetUSA; NCP Finance Ohio LLC; and Dinsmore & Shohl LLP dba NCP Finance Ohio LLC CIC dba NCP Finance Ohio LLC CLD dba NCP Finance Ohio LLC dba NCP Finance Ohio LLC dba NCP Finance Ohio LLC dba NCP Finance Ohio LLC.