A crackdown didn’t stop this payday lender from profiting from poor Ohioans

A Canton man borrowed $300 as shops began to close during the pandemic. He said he paid $780 for the loan with another $300 due.

A Miamisburg woman said she repaid $1,400 on a $1,000 loan and still owes more than $700.

A Patsakala man said he repaid his $300 loan when he found out about a surprise $150 monthly fee.

The three customers and several dozen others have complained to Ohio Attorney General Dave Yost in recent years about predatory practices in lending to CheckSmart stores.

In October 2018, the state legislature passed legislation mandating interest rate caps and fee caps on payday loans — short-term loans under $1,000 that are automatically repaid under the next paycheck. The loans, often given to poor borrowers with poor credit ratings and few capital alternatives, have historically caused customers to take on more debt to keep up.

The complaints indicate that the loans continued to be granted even after the new law came into force. CheckSmart claims its relationship with Green Bear Ohio, which makes the loans, ended in June 2020.

Yost, a Republican, has not taken action against the corporations. With both a Letter to Rep. Kyle Koehler, the Republican sponsor of the 2018 crackdown, and in response to media inquiries, Yost has declined to say whether he is investigating CheckSmart or Green Bear.

Conversely, in a civil complaint involving one of the companies’ loans, Franklin County Common Pleas Judge Jodi Thomas said in a Verdict last month that corporate lending practices have created a “legal fiction” designed to circumvent Ohio’s credit reform act.

Based on the consumer complaints and the court ruling, the credits work as follows: A customer walks into a CheckSmart storefront and asks for a $500 credit. Green Bear (going by the name of Crestline Finance) lends the money but provides an additional $501 as “collateral” that the customer does not have access to or control. Lenders charge interest on both the borrowed funds and the “collateral”.

A CheckSmart subsidiary, Insight Capital, buys the debt and acts as a collector, suing borrowers if they default. A CheckSmart spokesman said this is part of an “effort to preserve jobs and encourage another revenue stream.” The Franklin County Municipal Court alone lists hundreds of lawsuits that Insight Capital has filed over the past few years.

Judge Thomas found that the companies created this “convoluted” system to make a profit and circumvent consumer protections on payday loans by exceeding the $1,000 limit and operating under Ohio’s more lender-friendly mortgage loan laws.

Koehler made similar claims in a letter to Yost last summer.

“I am concerned that these loans may not comply with Ohio law or may constitute evasive, unfair or deceptive acts and practices,” Koehler said.

“This growing pattern of potential wrongdoing not only creates a hostile and unfair business environment for law-abiding lenders, but also harms Ohioans who have fallen victim to these predatory practices.”

Yost responded a month later, calling Koehler’s description an “accurate representation of the majority of consumer complaints,” but offering no specific actions he’s taking in response.

No Enforcement?

The complaints, 90 in total obtained through public records, span December 2018 through August 2021. One describes a Columbus woman who borrowed $400 on December 31, 2019 and repaid it within a month. She was then told she had opened a “$1,000 line of credit” on which she owed $300 in annual fees.

“The consumer said she did not agree to these terms,” ​​the complaint reads.

Ohio Attorney General Dave Yost. (Photo by Justin Merriman/Getty Images)

Nate Coffman, executive director of Community Development Corporation, championed the 2018 payday loan reform. By and large, he said, the law worked. Quoting a pew reporthe said the total cost of a payday loan has come down since it went into effect.

He called CheckSmart a “rogue company” that defies the law and issues “phantom lines of credit” to benefit poor Ohioans. What is needed is enforcement.

“We’re talking about them breaking the law directly,” he said. “This is an excellent opportunity for the Attorney General to dig deep into this issue and tell fraudulent operators that we will not tolerate this activity in Ohio.”

Yost declined an interview request. Spokesperson Bethany McCorkle said Yost could not lawfully confirm or deny any investigation. She said regulatory oversight rests with the Ohio Division of Financial Institutions and redirected questions there.

Mikaela Hunt, a spokeswoman for the Department of Financial Institutions, said the department is “aware of the company and the product,” but said it cannot legally disclose “audit information or investigative information” about Green Bear.

industry campaign money

Community Choice Financial operates 484 CheckSmart stores, including 111 in Ohio, according to a recent annual accounts. The company paid its CEO, William Saunders, more than $2.6 million in 2019, including $58,000 for personal use of the company jet.

Both Saunders and its Dublin-based company have spent big bucks to crack down on the 2018 legislation.

The bill stalled for much of 2017 but took on new life after then-Speaker Cliff Rosenberger resigned amid a criminal investigation into his financial ties to fellow payday loan lobbyists. (Rosenberger was not charged in the investigation.)

Saunders also runs the Ohio Consumer Lending Association, a nonprofit that donated $40,000 to another nonprofit called United for Clean Power. Together for clean electricity, which has never disclosed the source of its fundsattacked Koehler for resisting a nuclear bailout, which is now the focus of a criminal investigation by former House Speaker Larry Householder.

A spokesman for OCLA at the time denied any connection to the ads. On Thursday, he said the payment was a decision by the company’s former lobbyist, Neil Clark, who faces racketeering charges alongside Householder.

The United for Clean Power ad campaign was cited in Householder’s criminal complaint as evidence that Householder pressured other lawmakers, who referred to Koehler only as “Representative 6.” The homeowner has pleaded not guilty and is awaiting trial. Clark pleaded not guilty and has since died by suicide.

The payday loan legislation passed with all Democrats and most Republicans supporting it. CheckSmart’s PAC then issued checks for $1,000 to $2,000 to the Republican lawmakers who voted no, as well as a $5,000 check to Yost for his attorney general’s campaign.

In addition to the CheckSmart contribution, Yost received approximately $38,000 from Lee Schear and his wife. Lee Schear is President and CEO of NCPFinancea payday lender based in Dayton.

Yost took office with support from the Republican Attorneys General Association. Saunders donated $12,700 to RAGA in May 2018. Populus Financial Group, another payday lender, gave RAGA $250,000 in 2020. Yost’s spokesman said the political donations had no impact on the bureau’s work.

Response from CheckSmart

Patrick Crowley, a spokesman for Community Choice Financial, said CheckSmart has no affiliation with Green Bear and receives no funds from Green Bear. He said CheckSmart makes its money from other financial services, such as check cashing.

However, he acknowledged that the first CheckSmart locations were founded by James Frauenberg. Both Frauenberg and his son (who goes by his father’s name) left CheckSmart in 2008. The younger Frauenberg founded Green Bear Ohio, which lists his Park City, Utah home as an operating address on state filings.

Crowley declined to comment on Green Bear’s complaints, saying the company responded to its own complaints in a timely manner. He said Green Bear stopped making new loans in Ohio on June 27, 2020.

Referring to the court ruling, which called Green Bear’s loans legal fiction, he said the decision had no precedent and applied only to the one narrow case.

“Apart from that one, isolated decision, there was nothing remotely to indicate that Green Bear’s lines of credit were anything but fully compliant with its license issued by the Ohio Department of Commerce, Division of Financial Institutions “, he said.

Green Bear could not be reached for comment. No store locations could be identified in Ohio. However, it does not have an obvious website of its own one The complaints against the company list links to a lender for Californians only.