On Thursday, a group representing about 60 percent of the country`s payday lenders announced a new initiative it believes will address the criticism.
The Community Financial Services Association of America will now require each member of its organization to post their fees and rates on posters at least 18 inches by 22 inches in area with type at least half an inch tall.
“We have an obligation to make sure our customers understand how much the payday advance will cost before they enter into the transaction,” said D. Lynn DeVault, the president-elect of the association.
Payday lenders always have been required to provide that information, but the new requirements will make it even more obvious to potential borrowers, DeVault said.
State Rep. Matt Lundy, D-Elyria, is one of several lawmakers in Columbus who have put forward bills meant to make lending a more reasonable proposition for borrowers, who sometimes end up paying rates that run as high as 391 percent annually if borrowers fail to make payments on time.
Lundy said the new program isn`t a bad idea, but he believes more should be done.
“Even if you put up a sign that says â€˜don`t touch the wet paint,` people still want to touch the wall,” he said.
Lundy`s bill calls for more time for borrowers to repay their loans, a limit on late fees and more education on financial responsibility for consumers.
At least two other bills, which call for putting caps of 36 percent or 25 percent on the rates payday lenders can charge also are being considered, although the industry has said such caps would basically prevent them from doing business.
DeVault said a 36 percent cap, for instance, works out to a fee of about 10 cents per day.
“We can`t open the door, turn on the lights and pay staff for 10 cents a day,” she said.
Lundy has said he believes a cap would effectively kill the industry and doesn`t support it because payday lenders offer loan options for low-income families and those with poor credit.