Interest rate changes proposed

Ohio House Bill would limit short-term loan interest rates

Currently in Ohio it costs $680 for someone to borrow $300 for five months from a short-term lender, according to The Pew Charitable Trusts.

That’s compared to the $172 it costs in Colorado to borrow the same amount of money for the same amount of time from a socalled payday lender. In Ohio, short-term lenders are charging more than anywhere else in the country, according to Pew.

Ohio’s average annual percentage is 591 percent and Colorado’s is 117 percent.

A proposed Ohio House Bill, HB123, seeks to change the current landscape by limiting the short-term loans to 28 percent interest plus a monthly 5 percent fee on the first $400 loaned.

The bipartisan bill is supported by Reps. Kyle Koehler, R-Springfield, and Mike Ashford, D-Toledo.

“Unfortunately, many payday (short-term) lenders are geared

“There are currently too many loopholes that allow these payday lenders to operate the way they do.” — Lorain County Commissioner Matt Lundy

towards taking advantage of households that are living paycheck-to-paycheck,” Ashford said. “For too many families, this makes it impossible to pay off the 591 percent loans and Ohioans have been living behind the financial eight ball as a result. We hope to change that with this legislation.”

According to Pew roughly 1 million people in Ohio have taken out a payday loan.

“Our proposed reforms would bring stratospheric borrowing costs back down to earth from their hyper-inflated current levels,” Koehler said. “These adjustments are long overdue. They will help our state’s hard-working consumers using a proven model that will still preserve access to credit in Ohio.”

Lorain County Commissioner Matt Lundy is in favor of the proposed legislation.

“There are currently too many loopholes that allow these payday lenders to operate the way they do,” Lundy said. “We need legislation that will force these lenders to adhere to guidelines that protect the borrowers.”

Lundy said the majority of people in Columbus support the current situation.

“I feel the Republican majority are too friendly with the payday lenders,” he said. “The legislators aren’t worried about the short-term lenders being consumer friendly”

Lundy said he knows that part of it does fall on the borrower.

“I do realize that no one forces someone to go into these payday locations,” he said. “That being said, the individual that walks into theses places should be treated fairly.”

Lundy said these lenders can no longer be allowed to gouge people.

“The payday lenders can’t continue to loan out money that the borrower simply won’t be able to payback,” he said. “It’s an industry that has been able to take advantage of people for too long.”

Lundy also challenged the banks and credit unions to step up.

“One big reason why people have to resort to the payday people is because no equivalent loans are offered by the banks,” Lundy said. “If the banks start offering

short-term loans, borrowers would have a more consumer-friendly source.”

Pat Crowley, a spokesman for Ohio Consumer Lenders Association, feels this legislation would only hinder those who rely on short-term loans.

“We have people advocating in Columbus to continue the access to these loans going,” Crowley said. “We want to make sure any legislation leaves the borrower with options.”

Crowley said what is being proposed will hurt people that have used and understand the products payday lenders provide.

“The Colorado model, which is what they’re proposing, is a one-size-fits-all kind of deal,” he said. “Payday lenders can currently offer a slew of products and that wouldn’t be the case if the bill goes through.”

The bill was introduced March 9 and was sent to the House’s Government Accountability and Oversight March 21. It has yet to have a hearing.

“I do realize that no one forces someone to go into these payday locations. That being said, the individual that walks into theses places should be treated fairly.” — Lorain County Commissioner Matt Lundy