Ohio payday loan solution nears finish line, finally

After gathering dust for nearly a year, House Bill 123’s story for the past three months has been filled with plot twists worthy of Agatha Christie. Thankfully, a happy ending is in sight: a new state law to protect desperate, low-income borrowers from short-term loans with ruinous terms.

We hope this bill, unlike a 2008 predecessor, will work as lawmakers intend. The earlier law ostensibly limited interest and fees on short-term loans to the equivalent of a 28 percent annual-percentage-rate interest, but lenders got around it by simply operating under different sections of the law meant for different types of loans.

House Bill 123 closes that loophole and adds other important restrictions:

• Borrowers can’t be required to pay back everything, plus interest and fees, within two weeks. That time frame — unrealistic for anyone who needs money badly enough to take out a payday loan — has been a key factor in forcing people into ever-deeper debt. Borrowers had to take out new loans to pay off the old ones until the debt became insurmountable.

• For any loan of 90 days or less, borrowers can’t be required to make monthly payments greater than 6 percent of net income or 7 percent of gross income. They can pay more if they want.

• Overall, total fees and interest for a loan can’t add up to more than 60 percent of the original loan amount.

Senate passage of the bill by a 21-9 vote is a welcome repudiation of a paydaylending lobby that has managed to block reform for years. Ohio voters spoke clearly on the issue in 2008; the lending lobby tried to overturn the earlier reform law at the ballot but failed.

Despite voters’ clear preference, a second attempt at reform remained stalled for a decade. HB 123, introduced in March 2017, sat in the House Government Accountability and Oversight Committee for more than a year.

Lobbyists went to work pressing lawmakers to gut the restrictions; by April of this year, it looked like they would succeed. Then came the stunning resignation of former House Speaker Cliff Rosenberger on April 12 due to an FBI investigation of travel, including at least one junket with a paydayloan lobbyist. Suddenly reform was all the rage, and HB 123 was reported to the full House without a single change.

Committee members said the lending industry’s stubborn objection to reform motivated them to pass the bill intact.

However, an unseemly fight among Republicans over who would replace Rosenberger as speaker created a stalemate that idled the House for nearly two months.

After the House passed the bill on June 7, lending reform had another neardeath experience at the hands of the Senate Finance Committee, where the drive to neuter it resumed. Amendments were entertained that essentially would have rewritten the bill.

Finally on Monday, as lending lobbyists continued to insist that they couldn’t stay in business without abusive terms, Senate committee members seemingly echoed their colleagues in the House. Frustrated at the industry’s refusal to compromise, they approved a tough, fair bill by a 10-2 vote before lunch and the full Senate gave its blessing in the afternoon.

Now, we urge the House to sign off on the Senate version and send it to Gov. John Kasich for his signature.

It’s time for abusive short-term lending in Ohio to end.