Is Cincinnati's Fifth Third Bank Treading PayDay Lending Territory? Offers 'Early Access' Loans At 120% APR

By Harry Callahan

Special to The Daily Bellwether

CINCINNATI (TDB) -- And we thought the payday loan industry was history. Check out the accompanying graphic. There's a sentence that says, "The Transaction Fee is $1 for every $10 borrowed. This equates to an Annual Percentage Rate (APR) of 120%." That's not from a Mafia loan shark. It's from a national bank based in Cincinnati. Not only have payday loan stores like Check 'n Go and CheckSmart managed to survive a 2008 Ohio law capping the annual percentage rate on their loans at 28 percent, but now banks have gotten into the act. Only they don't call them "payday loans." Instead they're called "Early Access" advances by Fifth Third Bank, which fronts up to $500 to customers with direct-deposit paychecks, and "Checking Account Advances" at rival USBank.

Whatever they're called, they're pretty much what the payday lenders offer to people who can prove that they have regular income and a checking account. The Ohio General Assembly, Gov. Ted Strickland and Ohio voters thought they had strangled the payday loan industry by cutting maximum APRs from 391 to 28 percent. But lenders of all sort found ways around the law by charging loan origination fees, redefining loans as advances and using their national bank charters to shield themselves from the state interest rate cap. The APR at Fifth Third and USBank is sky high and, as Fifth Third admits in its terms and conditions, "This is an expensive form of credit."

Consumer groups have assailed payday lenders as predators of the working classes, but bank overdraft fees are awfully predatory, too. Facing more pressure from regulators to rein in their highly profitable fee programs, banks are now steering their checking account customers into payday loans. By the time all banks complete that transition, Ohio could have more payday loan outlets than ever. But they'll be known as banks.

OH-O5 Steve Buehrer: Payday Lenders Now Sending $$$ His Way

BOWLING GREEN, Ohio (TDB) -- A campaign finance report filed this week with the Federal Election Commission shows major players in the payday lending industry have started making contributions to State Sen. Steve Buehrer's GOP primary campaign. The Daily Bellwether noted $6,000 came in Monday in three separate contributions from two executives and a Kansas PAC.

Payday lenders have been tarred as preying upon low-income Ohioans. State lawmakers are considering measures that would place new limits on the industry, which has a growing reputation for gouging its customers.

Now Buehrer has found backers in the industry. A. David Davis of Cincinnati is listed as the executive vice president of Check N Go. He gave $2,000. So did Steven Scroggins of Cleveland, who is listed as the CEO of Check Into Cash. The PAC from Overland Park, Kan., is affiliated with QC Holdings.

Buehrer is a conservative Republican running for the GOP nomination in a Nov. 6 primary against State Rep. Bob Latta. Ohio's 5th Congressional District has been vacant since the death of U.S. Rep. Paul Gillmor last month.

[UPDATE: The race on the Republican side is rancorous and sharp-elbowed. Here's Right Angle Blog with news of the National Taxpayers Union endorsing Buehrer, a candidate who is running to the right of Latta and portraying him as a Bob Taft ally. And here's Buckeye State Blog with a new Latta ad that describes Buehrer as misrepresenting the state rep's record on tax votes in the legislature. No doubt about it, OH-O5 is political mudwrestling. Or a barnburner in a section of the state, NW Ohio, where there still are a lot of barns. RAB and BSB are lighting the fires in the 'sphere.]

Payday lending is under increasing scrutiny in Ohio because the short term loans can become quite costly if they are not paid off quickly. Earlier this month, a bill was filed in the Ohio House with 28 co-sponsors that takes aim at reported payday lending consumer abuses, and it includes a cap on interest rates. This Cleveland Plain Dealer editorial says legislators must act to clean up the industry, an industry that now seems to be in process of trying to purchase a seat in the U.S. House.