Ohio House committee finally approves stalled payday lending reform
Inside Subprime: May 3, 2018
By Lindsay Frankel
Last week, the Government Accountability and Oversight committee in Ohio finally approved House Bill 123, which would instill tighter restrictions on payday loans, 405 days after it was introduced by Republican representative Kyle Koehler and Toledo Democrat Mike Ashford. It is likely to pass in Ohio’s House, and then would need to go to vote in the Senate before the governor can sign it into law.
This has been a long time coming. Among the reasons for the long wait may have been the early resignation of Republican House Speaker Clifford A. Rosenberger, whose travel activities with loan industry lobbyists and lavish spending were under investigation by the FBI. Rosenberger explained that the decision to resign was not an admission of guilt, but instead due to the “demanding and intensive” nature of the investigation. He said, “I take this step with full confidence in my vindication.”
Still, the bill concerned an industry known for making campaign contributions, and it’s possible the investigation of wrongdoing may have swayed Republicans to follow popular opinion on the issue and allow the bill to pass.
The bill intends to protect payday loan borrowers in Ohio by capping the loan amount at $500, extending the loan duration, and requiring payday lenders in Ohio to verify the borrower’s eligibility, or the ability to repay the loan based on income. It also limits annual interest rates to 28 percent and changes the meaning of “interest” to include all fees paid by the borrower.
Payday loans in Ohio have the highest average annual interest rate in the nation, according to The Pew Charitable Trusts. Ohio payday loans cost four times as much as the amount charged in Colorado, for example. Yet 10 percent of adults in Ohio have used payday loans to cover their expenses, a concerning figure.
Lenders have been able to get away with charging a typical annual interest rate of 591 percent by operating as credit services organizations instead of short-term lenders. But the new bill would rectify the problem by capping interest rates for credit services organizations as well as placing minimum limits on loan amount and duration.
Lucas County commissioners are advocating for the bill, which received only one no vote from Rep. William J. Seitz in the House committee. Nick Bourke of The Pew Charitable Trusts called the legislation “the best example of a workable compromise on the payday loan issue that I have seen.” He added that the bill would save Ohio families $75 million per year. A poll showed that the bill also received bipartisan support from the public by overwhelming margins.
It remains to be seen whether House Bill 123 will be enacted into law. However, after the Short-Term Loan Law of 2008 failed to regulate payday lending activities, what is certain is that there is a need for payday loan reform in Ohio. Given the broad support for the bill so far, Ohioans can hope for new restrictions that will protect Ohio families from financial harm.
To learn more about payday lending in Ohio, check out these related pages and articles from OppLoans:
- Payday Loans in Cincinnati
- Payday Loans in Columbus
- Payday Loans in Cleveland
- Payday Loans in Toledo
- Payday Loans in Akron