Ohio is a state with some payday loan laws that could actually help consumers to keep the costs of such loans under control.

The problem is, there are loopholes, and those loopholes are allowing these companies to get away with charging significantly higher amounts than they should.

Keep in mind that the laws of the state may change to reflect a change in this information, but it is not happening yet.

History of Payday Loans in Ohio

Ohio has long had a strong banking and lending history. Even in the early 1900s, lenders would offer consumers small amounts of money as well as short term loans until their next paycheck arrived.

However, they charged pennies and did not always expect payment in full. By the 1980s the state had plenty of small business owners offering short term loans until the consumers next paycheck. They charged excessive fees hidden behind what looks like good terms.

Ohio Payday Loan Laws

There are some interesting facts about the laws in the state regarding the use of payday loans.

First, an incredible 10 percent of all Ohioans are using payday loans of some form to cope with financial need. Consider the laws in place.

• The state allows for consumers to repay the debt within six months (though most agree to just 14-day terms.)

• The maximum amount allowed to be lent is $800.

• The fees are complex. In general, a charge of five percent per month for any unpaid balance is charged. Plus additional fees. However, the state caps the APR at 28 percent for short term lenders.

That last bit sounds good. Though 28 percent is high, it's still a cap on the interest paid over the long term.

However, there's the catch.

Many payday lenders operate under the Small Loan Act or under the Mortgage Loan Act instead. This allows the lender to skirt the 28 percent cap and instead charge significantly higher fees.

They are able to avoid the Short Term Loan Act put in place to limit those high APRs (annual percentage rates) in this situation.

Are Ohio laws on payday loans enough?

That's not likely.

The average consumer is paying 390 percent on a 14 day loan when you figure the actual APR being charged to the consumer plus the numerous fees charged. All of that adds up to a significant amount of money being spent.

Unfortunately no matter how great the economy gets there will still be people that have no choice but to use payday loan lenders. And this leads to an addition problem and that’s people get caught in the payday loan trap – which is re-loaning to pay off other loans.

With that said thank goodness there are solutions available to get people out of the payday loan trap.

If you have to use a payday lender just make sure you go into it with your eyes wide open and take the time to understand the terms you are agreeing to.