Dozens of consumer complaints and a recent court ruling show how a Dayton-based payday lender continues to bury low-income customers in debt through predatory loans.

The complaints detail customers who borrowed a few hundred dollars for short periods from NCP Finance, only to wind up owing thousands to pay them off. They range in time from before and after enactment of a 2018 law aimed to reel in the industry, which has been known for decades for trapping borrowers in cycles of debt.

The recent law is the state’s second take at regulating payday lenders after a 2008 reform was so porous it accomplished next to nothing, according to a report from state legislative analysts. Lawyers who have challenged payday lenders in court agree.

“There are so, so many ways these institutions will try to evade the rules,” said Jacqueline Gutter, an attorney with the Legal Aid Society of Columbus, who has filed lawsuits against NCP.

The term “payday loan” typically refers to small-dollar, short term loans, usually to poorer people with limited access to traditional credit. They’re paid back automatically out of one’s next paycheck and often cost hundreds of points in annual percentage rates.

Last month, the Ohio Capital Journal reported how CheckSmart, another payday lender, and affiliated companies have managed to continue offering loans with soaring interest rates despite Ohio’s new lending rules. The company’s CEO and related political entities have showered lawmakers and Attorney General Dave Yost with campaign contributions.

Similarly, consumer complaints and a recent appellate court ruling against NCP Finance describe an ongoing debt cycle, with customers owing far more than they ever borrowed, sometimes against their vehicle titles.

NCP Finance is owned by Lee Schear, one of the most prolific Republican donors in Ohio politics. Since 2017 he has contributed nearly $47,000 to Yost — whose office fielded most of the complaints against the company and operates the state’s consumer protection division.

Some examples of the nearly 50 complaints, obtained by public records request, over the last few years: A Dayton woman said in March 2019 she received a $900 loan financed by NCP out of a Cash Max storefront, secured by her vehicle. She paid back the loan, but the loan office closed down. She was called by a third party claiming she owed another $3,000. Meanwhile, there’s still a lien against her car, blocking her receiving the title.

A Lorain County woman told the federal Consumer Finance Protection Bureau in September 2019 she has repaid $1,700 against a $900 loan financed by NCP. She was then told she owes $1,000 more.

A Springfield woman said in a December 2020 complaint to Yost’s office she borrowed about $1,900 in May 2019, secured by her personal vehicle as collateral. She said she repaid the loan, but the storefront has since shut down, so she can’t get her car title.

Most of the underlying loans predate the 2018 law, indicating some success with the new policy. However, the complaints and related lawsuits have continued, highlighting the ongoing debt trap issue.

In August, judges with the First District Court of Appeals sided with borrowers and questioned the legal legitimacy of some of NCP’s loans, which predated the 2018 law. Judge Pierre Bergeron called the case an example of lenders using “creative ways to try to charge excessive interest rates, often in a cat and mouse game with the legislature.”

To circumvent state lending laws, Bergeron ruled that NCP instead entered a “murky” relationship with SunUp Financial, a “credit services organization” that brokers the loan.

He wrote that SunUp charged fees that exceeded the loan amount by 200%. So along with the payday loan, the borrowers took out more money to pay SunUp’s fees.

“A loan that would otherwise be impermissible for NCP to make under Ohio law was then (theoretically, at least) possible simply through its association with SunUp,” Bergeron states. “Left unexplored is the degree to which the registrants and the brokers are working in concert, obfuscating the line between lawful and not.”

The borrowers in question were sued by a company that purchases the debts from the lenders to collect on them. The court ruling sent three cases down to lower courts to reconsider claims from borrowers, who challenged the legitimacy of the loans.

One plaintiff in the case financed a total amount of roughly $5,000 with NCP. But court records indicate she received only $1,750 directly, while another $3,260 went to SunUp to cover the CSO fee, which she must repay.

John Rebel, one of the attorneys who sued NCP in the case, said in an interview the company’s practices are illegal and questioned why state regulators allow NCP to continue operating.

He rejected the notion that the 2018 law really bit into the industry. Instead, he said, NCP and others continue to offer loans online and through storefronts under other Ohio statutes, all while charging between 150% and 200% APR.

“The state government, in my opinion, was in the pocket of the payday lenders,” he said.

The complex relationships between lenders, credit services organizations, and what are sometimes known as “rent-a-banks” (usually based out of Utah, whose laws are generally lender friendly) is seldom made clear to customers.

Gutter, the Legal Aid attorney, said her clients often have low financial literacy. Sometimes they reach out before they’re sued, sometimes not.

“Our clients have no idea that this whole scheme is going on,” she said. “They find out about it when they think they’ve paid off the loan and then find out they owe twice that.”

The OCJ contacted NCP through phone calls and emails three times last week regarding the consumer complaints and appellate ruling. The company didn’t respond to the inquiries.

Similarly, this news outlet contacted eight borrowers, none of whom responded. Their names have been withheld to respect their privacy.

Rebel said the Ohio Division of Financial Institutions ought to be cracking down on NCP and other payday lenders. Mikaela Hunt, an ODFI spokeswoman, said the office is “aware of products being offered” but cannot by law comment on investigations.

“DFI is able to refer complaints and investigations to the [Attorney General’s office] for enforcement or conduct our own investigation,” she said. “Dependent on a company’s license and the specific statute at issue, on its own DFI has the authority to assess civil fines, issue cease and desist orders, and suspend or revoke a company’s license through the administrative hearing process.”

Yost’s office provided the consumer complaints against NCP in response to a public records request. However, a spokeswoman didn’t respond to inquiries regarding NCP’s lending practices, enforcement from Yost, or the company CEO’s contributions to Yost’s campaign.

Rep. Kyle Koehler, a Springfield Republican who sponsored the 2018 law, has previously written a letter to Yost pushing him to investigate the business practices of CheckSmart, another payday lender. He reviewed the NCP complaints on request, noting that many were written about loans that predated the new law’s effective date.

“But they do shed light on exactly why we needed this law,” he said in a text message. “We are looking into this…”