Ohio payday lending regulations stall as interest rates soar
Inside Subprime: October 18, 2017
By Caroline Thompson
Annual rates for short-term payday loans in Ohio can be as high as almost 600 percent, the highest in the nation, according to The Pew Charitable Trusts. While many efforts have been made to curb the negative effects of the payday industry on vulnerable Ohioans, few legislative fixes have been at all effective.
Now, the Ohio Job and Family Services Directors’ Association is for the first time endorsing a bill in the Ohio House of Representatives that would, according to the Columbus Dispatch, “limit short-term lenders to 28 percent interest plus a monthly 5 percent fee on the first $400 loaned. Payments could not exceed 5 percent of a borrower’s gross income.”
Experts estimate this bill would save low-income Ohio residents roughly $75 million every year in fees and interest incurred from payday lending, but many republicans in the Ohio House are pushing back agains the regulations, saying that education, not limiting interest rates, is a better option.
“I think there’s places we can look at, like issues especially regarding financial literacy so folks have a better understanding of what they’re signing on to,” said House Speaker Cliff Rosenberger, a Republican.
Kyle Koehler, a Republican co-sponsor of the bill, says education isn’t going to cut it.
“When I’m drowning, there’s no time to teach me how to swim,” said Koehler. “You can’t rely on education. We just want to make sure payday lenders are living under rules that aren’t going to take advantage of folks who are going under.”
Koehler says his bill is facing pushback from other Republicans, who have been on the receiving end of more than $1.6 million in campaign donations from the payday lending industry since 2010. After a similar bill was passed in Colorado in 2010, about half of all payday lenders were forced to shut down. As a result, the payday industry has been flooding politicians in other states with cash, trying to prevent similar legislation from passing.
“We’re allowing poor people to be exploited because they don’t have access to (traditional credit),” said Joel Potts, executive director of the Ohio Job and Family Services Directors’ Association. “People who oppose this legislation want to treat these exploiters like they are doing people a favor.”
To learn more about the many dangers of payday, bad credit and other short-term loans, check out these related pages and articles:
- What are Bad Credit Loans?
- Payday Loans: The Most Dangerous Debt Trap
- The Truth About Payday Loans
- The High Cost of Payday Loans