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  A payday advance is a short-term loan a borrower takes out with the intention of repaying it with his next paycheck. Because of the short-term nature of payday advances, the interest rates on these loans are typically very high. Every state, including Ohio, has laws regarding payday advances or payday loans.
  
  

Ohio Short-Term Loan Act

• In Ohio, the Short-Term Loan Act was enacted in 2008 in an effort to cap interest rates at 28 percent, but lenders use other laws, such as the Mortgage Loan Act and the Small Loan Act, to charge interest rates as high as 680 percent. For example, according to an article published by the Heartland Institute, lenders get around the cap on interest rates by increasing their application or loan-origination fees, which is legal under the Small Loans Act.
  
  The New York Times reports that other lenders engage in similar types of creative lending, such as charging for credit checks, as permitted under the Mortgage Loan Act, or issuing a loan in the form of a check and then charging a check-cashing fee.
  
  

Licensing

• Under the Ohio payday loan laws, lenders are required to be properly licensed by the state. This involves investigative and license fees for each location of the business, and a certificate, when issued, must be displayed prominently. Investigative fees are meant to offset the cost the state incurs to investigate a payday loan company to ensure that they are qualified to become licensed.
  
  If a company keeps any of its data or loan documents outside Ohio, the company must pay any additional costs the state spends on investigating that data. A lender must notify the division of financial institutions (a government agency that is part of the Department of Commerce) of a change in address 30 days in advance, and a new license must be obtained.
  
  

Advertising

• All advertisements and business transactions must be carried out under the name in the license issued to the lender and must include the licensing number assigned by the division of financial institutions. This regulation is designed to ensure that payday loan companies don't make false promises or use confusing business names. For example, a payday lender can't have a business name that's too similar to a reputable bank or lending institution.
  
  Furthermore, a copy of all advertising must be kept on file for a period of one year from the date it was published or broadcast, available for inspection if requested by the division of financial institutions.
  
  

Lending Practices

• Payday loan companies are prohibited from lending money to borrowers on the same day that a borrower pays off a loan. This regulation was designed to put an end to a perpetual cycle of "rolling" payday loans in which customers would take a loan, and when that loan was due, the borrower would pay off the loan and immediately take out another one. For purposes of this regulation, a "borrower" is defined as anyone whose name is on the loan, including cosigners.
  
  

Application of Payment

• Ohio law outlines how a payment is to be applied on an outstanding balance. Any payment made by a borrower is to be applied in the following order: first to any costs a lender incurred, as determined by the law, in the collection of a default payment; then to any check collection charges; then to the loan origination fee; then to the interest charged that month; and finally to the principal loan amount.