Now is time to fix pay­day lend­ing in Ohio

Dayton Daily News - - IDEAS & VOICES - By Kyle Koehler Rep. Kyle Koehler is a busi­ness­man from Spring­field who rep­re­sents House Dis­trict 79.

Ev­ery day, hard­work­ing Ohio fam­i­lies try­ing to make ends meet take out pay­day loans to cover ba­sic liv­ing ex­penses. All too of­ten they end up trapped, for months or even years, in a costly cy­cle of debt, pay­ing fees that are hun­dreds, or even thou­sands of dol­lars more than the orig­i­nal loan.

The pay­day lend­ing prob­lem is ex­cep­tion­ally bad in Ohio. In fact, our state has the high­est pay­day loan prices in the na­tion, with lenders charg­ing 591 per­cent in­ter­est on av­er­age.

In ad­di­tion to mak­ing it harder for Ohio fam­i­lies to es­cape the cy­cle of debt, Ohio’s econ­omy suf­fers, as $145 mil­lion is paid in fees and in­ter­est each year, mostly go­ing to outof-state com­pa­nies.

This is some­thing we should care about. We can and must fix this sit­u­a­tion.

That’s why I, to­gether with my col­league, State Rep. Mike Ashford, in­tro­duced bi­par­ti­san leg­is­la­tion ear­lier this year to re­form pay­day loans.

House Bill 123 would pro­vide fair and af­ford­able loans for fam­i­lies in need — and close the reg­u­la­tory loop­holes that have been ex­ploited by pay­day lenders since Ohio vot­ers capped the in­ter­est rate in 2008. In spite of the will of Ohio vot­ers, pay­day lenders to­day are charg­ing even higher prices than be­fore and the prob­lem is worse than ever.

More than a mil­lion Ohioans have taken out pay­day loans. Th­ese are work­ing peo­ple who make an av­er­age of $30,000 a year. Bor­row­ers rep­re­sent a wide cross-sec­tion of Ohio’s res­i­dents, in­clud­ing sin­gle par­ents, vet­er­ans and se­nior cit­i­zens. The prob­lem is not iso­lated to ur­ban ar­eas — 76 of Ohio’s 88 coun­ties have pay­day loan stores, with 1.5 mil­lion ru­ral Ohioans liv­ing in th­ese ar­eas.

Bor­row­ers’ ex­pe­ri­ences are con­sis­tent: They are em­ployed (they must have an in­come to qual­ify for a loan) and have dam­aged credit scores. Fam­i­lies, of­ten liv­ing paycheck-to-paycheck, turn to pay­day lenders for short­term loans in an at­tempt to pay bills on time. The loans have un­af­ford­able pay­ments. Bor­row­ers can’t af­ford to pay the loan back with­out tak­ing out an­other, so they end up in debt for months on end.

HB 123 would ad­dress all of th­ese prob­lems and is based on a proven, suc­cess­ful model that en­sures ac­cess to credit re­mains widely avail­able — but at rea­son­able rates. In sum­mary, the bill will:

■ Cap in­ter­est rates at 28 per­cent, plus a max­i­mum monthly fi­nance fee of $20.

■ Re­quire af­ford­able monthly pay­ments for bor­row­ers, shield­ing 95 per­cent of a bor­rower’s monthly in­come.

■ Pro­vide bor­row­ers a rea­son­able time frame to re­pay the loan.

It’s im­por­tant to note that, for sev­eral rea­sons, re­cent pay­day reg­u­la­tions fi­nal­ized by the fed­eral Con­sumer Fi­nan­cial Pro­tec­tion Bureau won’t solve the is­sue in Ohio. The CFPB rule does not limit rates and fees lenders are al­lowed to charge; only state leg­is­la­tures have the author­ity to rein in prices.

Pass­ing the HB 123 leg­isla­tive com­pro­mise is ex­pected to save Ohioans $75 mil­lion each year, which will ben­e­fit lo­cal busi­nesses and cre­ate jobs in com­mu­ni­ties through­out Ohio. I am en­cour­aged by the grow­ing ranks of Ohioans for Pay­day Loan Re­form, a coali­tion that in­cludes com­mu­nity, faith, busi­ness, vet­er­ans and con­sumer groups from across the state. The time for re­form is now.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.