Lawmakers enlist prayers for payday-lending reform
It might take divine intervention for a paydaylending reform bill to become law this legislative session, but at least lawmakers had a coalition of faith leaders from across the state to lead a prayer vigil Wednesday at the Statehouse.
House Bill 123, introduced by Reps. Kyle Koehler, R- Springfield, and Mike Ashford, D-Toledo, has garnered few co-sponsors and has had no committee hearings to date.
The bill would reform payday- lending practices to grant borrowers more time to repay and cap maintenance fees and interest rates. The Ohio Coalition of Faith Leaders for Lending Reform, an organization created to reform payday lending, came out to support the legislation.
“I believe we need to watch out for one another,” Koehler said. “We legislate everything. … Right now in the state of Ohio, there are no guidelines for payday lenders — none. And that’s why our rates are so high.”
A similar bill, passed with bipartisan support in 2008, went too far in restricting the lenders, according to Koehler. Payday lenders were able to find a loophole in that law and essentially act without regulation. Koehler said the current bill would close the loopholes and find a middle ground for lenders and borrowers.
A Pew Research Center study published in late 2016 showed that Ohio has the most expensive payday loans in the country. A typical annual percentage rate is 591 percent; it would cost $ 680 in fees to borrow just $300 for five months. Lenders in Ohio charge more for loans than in any neighboring state, according to the study. These practices are largely focused on financially unstable or illiterate consumers.
“Payday-lending centers purposefully put themselves in neighborhoods where there are a lot of people who are in financial crisis,” Carl Ruby, a Springfield pastor, said. “A lot of times when people sign up for a payday loan, they don’t understand what they’re getting into.”
Advocates for paydaylending services see things a bit differently. Patrick Crowley, a spokesman with the Ohio Consumer Lenders Association, said his group is not interested in reforming any laws in Ohio.
“We certainly don’t look at it as predatory,” Crowley said. “We look at it as providing a service. … We make a profit like any business, by providing a service.”
Crowley said borrowers are always educated about the nature of their loans and any penalties or fees associated with them. Sometimes, though, it can become a vicious cycle of debt.
It began with a $300 loan for Denise Brooks, a speaker at the vigil. When the interest on that loan made her short on her next round of bills, she borrowed another $600. She became trapped in a cycle of debt, her bills piling up and things getting “more and more out of control.”
Brooks said she was nearly evicted and wildly depressed while trying to escape from under the thumb of her payday loans. She became suicidal, eventually writing a final note to her daughter and planning to drive far enough away from home that her daughter wouldn’t find her body. Brooks found relief when her brother let her move in, giving her some flexibility to escape the debt cycle.
The bill, intended to prevent circumstances similar to Brooks’, appears to have slim prospects of becoming law. But that hasn’t stopped faith leaders from hoping.
“I think with God all things are possible,” Ruby said, quoting the official state motto. “As a pastor, there are times I feel that we are in a David and Goliath battle, but we think in this case David is going to win.”