A Canton man borrowed $300 just as businesses began to close during the pandemic. He said he paid $780 back on the loan with another $300 owed.
A Miamisburg woman said she has paid off $1,400 on a $1,000 loan and still owes more than $700.
A Patsakala man said he paid off his $300 loan when he learned of a surprise $150 monthly fee.
All three customers, plus several dozen others, have complained to Ohio Attorney General Dave Yost in recent years about abusive payday lending practices in CheckSmart storefronts.
In October 2018, state lawmakers passed legislation imposing interest rate caps and fee limits on payday loans – short-term loans under $1,000 that are automatically repaid with the next paycheck . The loans, often to poor borrowers with bad credit and few alternatives for capital, have a history of leaving clients in a cycle of taking on more and more debt to keep up.
Complaints indicate that the loans continued to flow even after the new law came into effect. CheckSmart states that its relationship with Green Bear Ohio, which issues the loans, ended in June 2020.
Yost, a Republican, has not acted against the companies. In both a letter to Rep. Kyle Koehler, the Republican backer of the 2018 crackdown, and in response to media questions, Yost has declined to say whether he is investigating CheckSmart or Green Bear.
By contrast, in a civil suit related to one of the companies’ loans, Franklin County Common Pleas Judge Jodi Thomas said in a decision last month that the companies’ lending practices created a “legal fiction” designed to evade Ohio’s credit reform law.
Based on consumer complaints and the court ruling, the loans work like this: A customer walks into a CheckSmart store and asks for a $500 loan. Green Bear (going by the name of Crestline Finance) lends the money, but places an additional $501 in “security” that the customer has no access to or control over. Lenders charge interest on both the borrowed funds and the ‘security’.
A CheckSmart affiliate, Insight Capital, buys the debts and acts as a collector, suing borrowers if they default. A CheckSmart spokesman said this was part of an “effort to keep jobs and boost another source of income.” The Franklin County Municipal Court alone shows hundreds of lawsuits filed by Insight Capital over the years.
Judge Thomas found that the companies devised this “intricate” scheme to profit from and evade consumer protections in payday loans by going over the $1,000 limit and operating under the most favorable mortgage lending laws for US lenders. Ohio.
Koehler made similar claims in a letter to Yost last summer.
“I am concerned that these loans do not comply with Ohio law or constitute evasive, unfair or deceptive acts and practices,” Koehler said.
“This growing pattern of potential misconduct not only creates a hostile and unfair business environment for law-abiding lenders, it harms Ohioans who have fallen victim to these predatory practices.”
Yost responded a month later, calling Koehler’s description an “accurate representation of most consumer complaints,” but did not offer any specific action it is taking in response.
The complaints, 90 in all obtained via public records request, span December 2018 through August 2021. One describes a Columbus woman who borrowed $400 on Dec. 31, 2019 and paid it back in a month. She was then told that she had opened a “$1,000 line of credit” for which she owed a $300 annual fee.
“The consumer stated that she did not agree to these terms,” the complaint says.
Nate Coffman, CEO of the Community Development Corporation, pushed for 2018 payday loan reform. On the whole, he said, the law worked. citing a bank reportHe said the total cost of a payday loan has plummeted since it went into effect.
He called CheckSmart a “rogue company” that defies laws and issues “phantom lines of credit” to profit off Ohio’s poor. What is needed is compliance.
“What we are talking about here is that they are flying directly against the law,” he said. “This is a great opportunity for the attorney general to dig into this issue and tell rogue operators that we will not tolerate this activity in Ohio.”
Yost declined an interview request. Spokeswoman Bethany McCorkle said Yost cannot legally confirm or deny any investigation. She said regulatory oversight falls to the Ohio Division of Financial Institutions and redirected questions there.
Mikaela Hunt, a spokeswoman for the Division of Financial Institutions, said the department is “aware of the company and the product” but said it cannot legally release “examination information or investigative information” about Green Bear.
Industry Campaign Cash
Community Choice Financial operates 484 CheckSmart stores, including 111 in Ohio, according to a recent report Financial state. He paid its CEO, William Saunders, more than $2.6 million in 2019, including $58,000 for personal use of the company plane.
Both Saunders and his Dublin-based company spent heavily to oppose the 2018 legislation.
The bill stalled for much of 2017 but gained new life after then-House Speaker Cliff Rosenberger resigned amid a criminal investigation into his financial dealings with other payday loan lobbyists. (Rosenberger was not charged in the investigation.)
Saunders also runs the Ohio Consumer Loan Association, a nonprofit organization that donated $40,000 to another nonprofit called United for Clean Power. United for Clean Energy, that he never revealed the origin of his fundsattacked Koehler for opposing a nuclear bailout now at the center of a criminal investigation into former House Speaker Larry Householder.
An OCLA spokesperson denied any connection to the ads at the time. On Thursday, he said the payment was the decision of former company lobbyist Neil Clark, who was charged along with Householder with racketeering.
The United for Clean Power ad campaign was cited in Householder’s criminal complaint as evidence that Houseer pressured fellow lawmakers, who only referred to Koehler as “Representative 6.” The house husband pleaded not guilty and awaits trial. Clark pleaded not guilty and has since committed suicide.
The payday loan legislation passed with the support of all Democrats and most Republicans. The CheckSmart PAC then wrote checks worth between $1,000 and $2,000 to Republican lawmakers who voted no, plus a $5,000 check to Yost for his attorney general campaign.
In addition to the CheckSmart contribution, Yost received about $38,000 from Lee Schear and his wife. Lee Schear is President and CEO of NCPFinancea Dayton-based payday lender.
Yost came into office with the backing of the Republican Attorneys General Association. Saunders gave RAGA $12,700 in May 2018. Populus Financial Group, another payday lender, gave RAGA $250,000 in 2020. Yost’s spokesman said political contributions have no effect on the office’s work.
Patrick Crowley, a spokesman for Community Choice Financial, said CheckSmart is not affiliated with Green Bear and does not receive funding from Green Bear. He said CheckSmart gets its money from other financial services like check cashing.
However, he acknowledged that the first CheckSmart locations were founded by James Frauenberg. Both Frauenberg and his son (who shares his father’s name) left CheckSmart in 2008. The young Frauenberg founded Green Bear Ohio, which includes his residence in Park City, Utah, as well as his operating address in state submissions.
Crowley declined to comment on Green Bear’s complaints, saying the company responded in a timely manner to its own complaints. He said that Green Bear stopped originating new loans in Ohio on June 27, 2020.
Regarding the court ruling that described the Green Bear loans as a legal fiction, he said that the decision does not carry precedent and only applies to a limited case.
“Other than this isolated decision, there has been nothing remotely to suggest that Green Bear’s lines of credit were not in full compliance with their license issued by the Ohio Department of Commerce, Division of Financial Institutions,” he said.
Oso Verde could not be reached for comment. No store locations in Ohio could be identified. Apparently it doesn’t have a website of its own, though a listed in the complaints against the company’s ties to a lender exclusively for Californians.
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