Ohio Legislature and voters consider two routes to predatory lending reform

Inside Subprime: April 9, 2018

By Aubrey Sitler

Good news may soon be on the horizon for consumers seeking payday loans and cash advances in Ohio, where people with bad credit are often swindled into taking insanely and unfairly expensive loans from predatory lenders.

With fees for short-term, no-credit-check loans that typically add up to annual percentage rates (APRs) of 591 percent, the Pew Charitable Trusts reports that payday loans in Ohio are the most expensive of any state.

Payday lending in Ohio is supposed to be regulated by the Ohio Short-Term Loan Act. Back in 2008, Ohioans voted with an overwhelming 63 percent majority to pass this law that restricts predatory lending, capping short-term, payday lenders to 28 percent interest rates and minimal fees.

However, in practice, many lenders have continued to get around adhering to the Short-Term Loan Act through various legal loopholes. Many payday lenders in Ohio seek out licenses to legally operate as “credit service organizations.” Under the Ohio Mortgage Lending Law and the Ohio Small Loan Act permit, these types of businesses can offer loans that serve the same purpose as payday loans without being required to limit their fees like licensed payday lenders must in Ohio.

Now, a decade later, there are currently two key initiatives underway that could change payday lending laws in favor of last-resort borrowers in Ohio: a bill in the Ohio House of Representatives and a voter-driven ballot measure that many people hope will be on the Ohio ballot this November.

The bipartisan Ohio House Bill 123, which was introduced by Reps. Kyle Koehler (R-Springfield) and Michael Ashford (D., Toledo) in March 2017, proposes to close the loopholes that predatory lenders have been operating under to ensure that payday loan borrowers are only subjected to the 28 percent APR and low fees that the Ohio Short-Term Loan Act intended.

Somehow, though, the bill has been stalled in the House, gaining little movement for over a year.

Thus, advocates have begun to take matters into their own hands, sidestepping the slow-moving legislative process by developing a ballot measure petition.

This petition, called the Short-Term Loan Consumer Protection Amendment, proposes to amend the Ohio Constitution to close the loopholes through which predatory lenders are operating. The petition was first filed on February 28, 2018 thanks to the efforts of the Ohio Community Development Corporation Association, but Ohio Attorney General Mike DeWine rejected it on March 9, 2018 for several reasons. Among them, the Attorney General noted multiple issues with how the measure’s summary language was worded, citing that it seemed in multiple places to be either incomplete or inconsistent with what the full amendment proposed.

While this rejection seems typical of first-time ballot measure petitions, its requestors have a daunting task before them if they hope to get it on the November ballot: They have until July 4, 2018 to amend the petition and get 1,000 Ohio voters to sign it to qualify for this year’s general election.

These fledgling proposals are still far from coming to fruition, but they are worth watching in the run-up to the 2018 general election in Ohio and beyond.

To learn more about payday lending in Ohio, check out these related paes and articles from OppLoans:

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