The Ohio Department of Commerce told state legislators yesterday that if they think there is a problem with new payday-lending regulations, the fix needs to come from the General Assembly.

Some had hoped that the commerce department, which regulates the payday-lending industry in Ohio, could act on its own to stop payday stores from charging higher rates for short-term loans than was envisioned last year under the state's new payday-lending law. House Bill 545 capped the annual interest rate at 28 percent.

Lenders are getting around the new law, which was affirmed overwhelmingly by voters in November, by offering short-term loans under Ohio's Small Loan Act. Many are then adding fees for credit checks or for cashing the check they just issued, raising the cost of the loan closer to the 391 percent interest rate that the General Assembly tried to eliminate.

If legislators want to stop the practice, "it's probably something that needs to be done legislatively, due to the fact that they are operating under licenses set in statute," Ernie Davis, the commerce department's legislative director, told the House Consumer Affairs Committee.

Rep. Matt Lundy, an Elyria Democrat who is committee chairman, said he is starting to draft a bill, as is Sen. Christopher Widener, a Springfield Republican who sponsored the payday law last year.

Each said he wants to ensure that lenders are abiding by terms set in the new law.

Gov. Ted Strickland also said that if the spirit of the new law is being violated, "then I would be happy to revisit that situation."

Some hoped to avoid another contentious legislative fight. "I think (the Department of) Commerce has more authority than they're using," said Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, a major supporter of the new law.

Commerce's Davis said that many payday lenders are issuing checks or money orders instead of cash. Those stores are then charging a fee if the borrower wants to cash that check right away.

"We have heard anecdotally that some stores were requiring that instrument to be cashed as part of the transaction," Davis said. "Our inspectors have not yet seen that taking place."

Faith is highly critical of the new check-cashing fees. "Why are they charging a fee to cash their own check? They are doing it purely to pack fees into the transaction," he said.

John Rabenold, vice president of governmental affairs for Cincinnati-based Axcess Financial, which runs Check 'n Go, said half of his company's 72 Ohio stores have closed, and the rest are struggling.

He welcomes a reopening of the debate, although not for the same reason as Lundy and Widener. "Let's get this debate back up on the table, and let's talk about how to best serve the customer," he said.

Dispatch reporter Mark Niquette contributed to this story.

jsiegel@dispatch.com