Pay­day-loan law changes slow to gel

The Columbus Dispatch - - Metro&state - By Jim Siegel

A num­ber of Ohio law­mak­ers say they rec­og­nize the need to change Ohio’s failed pay­day lend­ing law, but ques­tions re­main about what steps they are will­ing to sup­port.

No pay­day lenders in Ohio are reg­is­tered un­der the Short Term Loan Act that law­mak­ers ap­proved and vot­ers over­whelm­ingly up­held in 2008. More than 600 stores across Ohio are us­ing other sec­tions of law, not de­signed with pay­day lenders in mind, and crit­ics

say they are charg­ing an­nual per­cent­age rates of more than 600 per­cent to bor­row­ers des­per­ate for cash.

“I was not sent here to rep­re­sent busi­nesses that are mostly owned by outof-state en­ti­ties that are charg­ing Ohioans con­sid­er­ably more than they charge con­sumers in other states be­cause of a loop­hole,” Rep. Kyle Koehler, R-Spring­field, told a House com­mit­tee on Wed­nes­day. “I was sent here to rep­re­sent the ci­ti­zens of Ohio.”

Koehler and Rep. Michael Ash­ford, D-Toledo, hope Wed­nes­day’s hear­ing starts a process to a state pay­day law that lenders ren­dered in­ef­fec­tive.

The bill would al­low short-term lenders to charge a 28 per­cent in­ter­est rate plus a monthly 5 per­cent fee on the first $400 loaned. Monthly pay­ments could not ex­ceed 5 per­cent of a bor­rower’s gross monthly in­come.

Pay­day crit­ics say the short-term loans trap peo­ple in a debt cy­cle, where bor­row­ers re­peat­edly need new loans to pay off old ones.

Pas­tor Carl Ruby of the Cen­tral Chris­tian Church in Spring­field, part of a coali­tion back­ing the bill, said he has seen the pain caused by pay­day loans, in­clud­ing a woman con­tem­plat­ing sui­cide when a $500 loan turned into thou­sands in debt.

“I think the moral­ity and the facts are on our side,” he said.

“Peo­ple who go to pay­day loan cen­ters are des­per­ate. They don’t un­der­stand the cost and fees they’re get­ting into.”

The bill is go­ing to cut off ac­cess to credit, said Pat Crow­ley of the Ohio Con­sumer Lenders As­so­ci­a­tion, which rep­re­sents pay­day lenders. “There’s no al­ter­na­tive for many of these peo­ple.”

The bill is based on a law in Colorado, where re­form sup­port­ers say plenty of pay­day shops still op­er­ate. Top House Repub­li­cans are sig­nal­ing that amend­ments are likely.

“There is a de­sire to make some changes to the pay­day lend­ing law,” said Rep. Kirk Schur­ing, R-Can­ton, the No. 2 House leader. “How that’s go­ing to look, I don’t know yet.”

Rep. Bill Seitz, R-Cincin­nati, said he’s not con­vinced that the bill is the right ap­proach.

“We all ac­knowl­edge it’s an is­sue, but the ques­tion is what do you do about it,” he said.

Some ideas, Seitz said, are to cod­ify a new fed­eral rule that pro­hibits loans with terms of less than 45 days. There also is talk of a pay­day tax to cre­ate a fi­nan­cial lit­er­acy fund.

The is­sue also may find sup­port in the Se­nate, es­pe­cially if a coali­tion sup­port­ing the bill moves to­ward a bal­lot is­sue.

“I think we’d be in­ter­ested in look­ing at po­ten­tial re­forms in that area,” said Se­nate Pres­i­dent Larry Ob­hof, R-Me­d­ina. “Ob­vi­ously we’ve heard about the po­ten­tial for a bal­lot ini­tia­tive as well, and my pref­er­ence is al­ways that if some­thing can be han­dled leg­isla­tively, it ought to be.”

Pay­day re­form is po­lit­i­cally chal­leng­ing.

The pay­day in­dus­try has given sig­nif­i­cant cam­paign money. The is­sue also di­vides both par­ties — an­tireg­u­la­tion Repub­li­cans and Democrats wor­ried about cut­ting off credit are re­luc­tant to sup­port changes.

The Cleve­land Clergy Coali­tion, a group of 85 African-Amer­i­can churches and 10 re­li­gious or­ga­ni­za­tions, op­poses the bill. Mean­while, the Cleve­land Branch of the NAACP has en­dorsed it. A key dis­agree­ment is whether the bill would cut off credit.

“In the African-Amer­i­can com­mu­nity, there are no fi­nan­cial op­por­tu­ni­ties be­cause the banks have left us,” said Pas­tor Aaron Phillips of Sure House Bap­tist Church. “Many times peo­ple use this as a tool to pay their rent, their car note or to keep their lights on. If they don’t have this, they won’t have any­thing.”

With­out pay­day lenders, peo­ple will re­sort to loan sharks, Phillips said. “The (pay­day) fees are a lot less than what you’d get out on the streets.”

Danielle Syd­nor, a mem­ber of the Cleve­land NAACP’s ex­ec­u­tive com­mit­tee, said she agrees that there is a need for small loans, but the cur­rent in­dus­try is “prey­ing on our neigh­bor­hoods.”

And most of the same lenders op­er­at­ing in Ohio, Syd­nor said, also are op­er­at­ing in other states with lower fees.

“Will they all leave? Ab­so­lutely not,” she said. “It will put our ci­ti­zens in a bet­ter po­si­tion be­cause you’ll have a few places with bet­ter pro­cesses in place, and there won’t be six or seven try­ing to get you at ev­ery turn.”

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