Ohio Payday Loan Reform Celebrated as National Model
Inside Subprime: Nov 15, 2018
By Lindsay Frankel
Ohio’s new payday loan law received high praise for being a national model at a recent conference in Washington. The briefing, hosted by Pew Charitable Trusts, focused on the successes of Ohio’s Fairness in Lending Act, which was enacted in July. Consumer advocates came together at the conference to discuss how the Act could be used as a model for reform in other states.
During the talk, advocates for payday loan reform said they fought industry lobbyists who wanted to maintain the high interest rates and fees associated with payday loans in Ohio. Before the new legislation, which will not be fully enacted until April, it cost borrowers $680 to borrow $300 for five months. Payday loans in Ohio were up to four times more expensive than in other states that placed caps on interest rates.
Ashtabula county auditor David Thomas said that when pushing for reform, it was important to make sure lawmakers were aware of the debt trap payday loans create for Ohioans. Senator Vernon Sykes added that public sentiment concerning payday loans helped to push the changes through. Ohio voters overwhelmingly approved a rate cap on interest ten years ago, but payday lenders were able to find a loophole that allowed them to continue to charge exorbitant rates.
Sykes recommended that other states consider ballot initiatives for payday loan reform, considering that 70 percent of Americans support stricter regulation of the industry. In a recent Colorado ballot initiative, new legislation to curtail payday loans passed with support from 77 percent of voters.
Senator Jay Hottinger suggested striking a balance between the needs of borrowers and lenders, noting that ballot initiatives that go too far in regulating the industry face the chance of defeat. Participants also raised the possibility that new payday loan alternatives may arrive in Ohio once the rules go into effect.
The new legislation passed after Speaker Cliff Rosenberger’s resignation, which followed an FBI probe into Rosenberger’s travel activities with payday loan industry lobbyists. One advocate told the Pew audience that the scandal was unrelated to the passage of the Act, while another contended that it may have pushed some undecided votes towards reform.
The new rules, which not begin to take full effect until April, will limit interest rates and fees to no more than 60 percent of the loan principal. Pew noted that the law “achieves three fundamental goals: affordable payments, lower prices, and reasonable time to repay.” Ohioans are expected to save more than $75 million annually from the rate caps, which Pew said would help strengthen the local economy.
For more information on scams, payday loans and title loans, check out all of our state-by-state Financial Resource Guides including Ohio and Ohio cities like: Akron, Canton, Cincinnati, Cleveland, Columbus, Dayton, Fremont, Lima, Springfield, Toledo and Youngstown.