Ohio House ignored fair payday loan reform
TNate Coffman
he time is now for Ohio’s legislature to do what the people want it to do — reform the state’s horrific payday loan industry.
Volunteers from across the state hoped to get that done through a bipartisan House measure that would allow payday lenders to operate profitably in Ohio. That legislation — House Bill 123 — includes key consumer protections: affordable payments, lower rates, a longer repayment time frame. It would not eliminate payday lending in Ohio. But now that thoughtful, balanced bill is being undone by a package of proposals crafted by House leaders behind closed doors.
Should the House continue to fail to take meaningful action, I am hopeful that Ohio’s Senate will step up and lead the way. Barring that, a group of us from across the state is working to submit updated paperwork and petitions to the attorney general’s office to launch a process of getting payday loan reform on the ballot.
For more than a year we have been working very hard for passage of H.B. 123, which would address the dangers of short-term highinterest predatory lending. It would cap interest rates at 28 percent and provide other measures to protect working-class Ohio families. Interest rates on payday loans in Ohio are now the highest in the nation.
It’s patterned after legislation that has succeeded in states like Colorado, where it has dramatically reduced costs while also ensuring that people still have access to short-term emergency loans.
Despite repeated promises to quickly address the issue, H.B. 123 is stalled. House Speaker Pro Tempore Rep. Kirk Schuring recently outlined new payday lending proposals that do not include closing of the legal loophole that allows lenders to charge the highest payday lending rates in the nation. The single most important part of reform is off the table. It is a glaring omission that renders the proposal meaningless.
Payday lenders tricked Ohioans once before and they are trying to do it again. In 2008, Ohio voters overwhelmingly approved a measure that would cap interest on these types of loans at 28 percent. Payday lenders conned Ohio voters by taking advantage of a loophole that allowed them to keep offering the shortterm loans at the same or even higher rates. The ballot initiative, approved by 64 percent of Ohio voters in 2008 had zero impact on payday loans. Cost and usage have actually gone up to such an extent that Ohio has both the highest costs and one of the highest per-capita usage rates in the United States.
More than a million hardworking Ohioans have turned to payday loans to help with everyday expenses. They fully intend to pay those loans off, but because the costs and payments can exceed 700 percent, the typical borrower often ends up reborrowing for five months or more before they can pay off the principal. The industry even has a name for this — they call it “churning” the loan, reissuing a loan over and over again with new fees and higher costs. Much of their profit as an industry comes from this deplorable practice.
Without resolution from Ohio’s House leaders, we are hopeful that Ohio Senate leadership will step in to help make true payday reforms on behalf of Ohio families a reality.
It’s clear, though, that we can’t simply wait for elected officials to do the right thing. Our ballot initiative will make these loans fair and reasonable. Payday lenders can still make a profit, but not by gouging our neighbors with outrageous rates and fees, or churning loans over and over again to trap borrowers in a deepening cycle of debt.
The reforms proposed in H.B. 123 would save payday borrowers $75 million annually — money that would stay in Ohio communities rather than being carted away to the out-ofstate corporate headquarters of payday loan companies that operate here.
Our volunteer statewide coalition, Ohioans For Payday Loan Reform, is resolute and committed — more than ever — to enacting true and meaningful payday loan reforms in Ohio.