Opponents of Ohio payday loans seek further legislative restrictions

Inside Subprime: May 23, 2018

By Kerry Reid

After several roadblocks, it appears that the Ohio House of Representatives is finally ready to pass legislation that will further regulate payday loans in Ohio. But advocates for payday loan reform in the Buckeye State aren’t stopping there. They are also pushing for a constitutional amendment to further restrict what they see as predatory practices.

House Bill 123, sponsored by Rep. Kyle Koehler (R-Springfield), was slated for a vote last week but was delayed after Republican Speaker of the Ohio House Cliff Rosenberger resigned in April. According to an article in the Dayton Daily News from April, Rosenberger’s resignation followed reports that the FBI was looking into a trip he took to London last year, as well as other international trips where he was accompanied by members of the payday lending industry.

As reported by Jackie Borchardt of Cleveland.com, “current House leaders say they cannot vote on legislation until they elected a new House Speaker.”

If passed into law, HB 123 (which was first introduced over a year ago but languished in committee until Rosenberger’s resignation gave it new life) would set up several new requirements for the payday loan industry in Ohio. The industry was outlawed in the state for more than 50 years, until the passage of 1995’s Pay Day Loan Act, which exempted payday lenders from state usury laws. Legislation passed in 2008 required payday lenders to be licensed by the state and capped the annual percentage rate, or APR, for payday loans in Ohio at 28 percent, and that limit was also approved by 63.6 percent of voters in a ballot referendum spurred by the payday industry.

However, several lenders sidestepped those rules by getting licensed as credit service organizations, which face no fee limits. The new restrictions in HB 123, Bischoff notes, include “closing loopholes, limiting monthly payments to no more than 5 percent of the borrower’s monthly income, limiting fees to $20 per month or no more than 5 percent of the principal up to $400, requiring clear disclosures for consumers and caps on fees and interest at 50 percent of the original loan amount.”

Payday lenders in the state claim that these new rules will cripple the industry. Patrick Crowley, spokesman for the Ohio Consumer Lenders Association, said that “HB 123 is bad for consumers because it will cut access to credit for hundreds of thousands of responsible Ohioans who rely on and use short-term loans to manage their finances.”

However, others believe that even HB 123 won’t go far enough. Ohioans for Payday Loan Reform, a coalition of faith-based groups and other advocates for low-income citizens of Ohio backs a state constitutional amendment that would enforce an annual percentage rate, or APR, of 28 percent; limit repayment amounts to 5 percent of a borrower’s gross monthly income; and eliminate penalties for early repayment. The organization maintains that reform would save Ohioans more than $75 million a year.

Ohio Attorney General Mike DeWine certified a petition summary on May 21 of the “Short-Term Loan Consumer Protection Amendment.” The next step is for the Ohio Ballot Board to determine if the proposal contains one or multiple ballot issues. Once it clears the Ballot Board, then supporters can collect signatures to put it on the November ballot. They need around 306,000 signatures from Ohio registered voters by July 4 in order to qualify for the ballot.

DeWine, who has said that he favors some payday loan reforms, is also running for governor of Ohio on the GOP ticket. His Democratic opponent, Richard Cordray (whom he defeated in 2010 in the state attorney general’s race, when Cordray was the incumbent in that office), is the former director of the federal Consumer Financial Protection Bureau. While at the CFBP, Cordray pushed for a rule requiring lenders to determine a borrower’s capacity to repay before issuing a loan – a rule lenders still oppose.

Cordray was quoted in Bischoff’s May 21 article describing the sway payday lenders hold over politicians. “They rule the roost in many state legislatures,” he said. “They give extensive campaign contributions. They spread money around lavishly. They tend to buy up all the top lobbyists. They are crafty, they are cunning and they are absolutely well-financed.”

Pass or fail, proponents of HB 123 seem determined to move forward with the constitutional amendment expanding protections for payday borrowers in Ohio.

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

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