Richard Cordray criticizes Ohio payday lending legislation
Inside Subprime: June 14, 2018
By Lindsay Frankel
On June 7, the Ohio House passed a bill that would tighten restrictions on payday lenders in Ohio. This long-awaited decision was stalled during a criminal investigation of House speaker Cliff Rosenberger, who resigned in April of 2018. Now, the bill will move to the Senate.
Ohio’s Short Term Loan Act, which capped payday loan amounts at $500 and annual interest rates at 28 percent, was approved in 2008. But payday lenders registered as mortgage lenders instead, effectively getting around the law. Since then, the law has received criticism from Democrats and consumer advocates.
After the Ohio Supreme Court upheld the law in 2014, one judge asked,”Were the lobbyists smarter than the legislators? Did the legislators realize that the bill was smoke and mirrors and would accomplish nothing?”
Payday loans in Ohio are some of the most predatory in the nation.
Richard Cordray, former head of the Consumer Financial Protection Bureau and current Democratic candidate for Ohio governor, tweeted last month: “The current shutdown of the State House has delayed legislation addressing payday lending, where Ohio’s laws are now the worst in the nation. Things have gotten so bad that it is legal to charge 594 percent interest on loans that end up ruining people’s lives. Unconscionable.”
Cordray’s comparison is in line with data from the Pew Charitable Trusts. A 2014 report revealed that payday loans in Ohio have the highest average annual interest rates in the nation at 591 percent. That adds up to $680 in fees for a $300 payday loan over the course of five months. And because Ohio does not cap loan amounts like most states, borrowers can easily find themselves in a cycle of debt that is impossible to overcome.
Cordray worked on developing the national 2017 CFPB payday lending rules before resigning to run for governor. The rules, which would have guaranteed several protections for borrowers, have since been put on hold by current acting director Mick Mulvaney. Cordray’s concerns, therefore, need to be addressed at the state level to ensure protections for Ohioans.
New law may make things better for Ohio payday borrowers.
Efforts to change state law in Ohio gained momentum when House Bill 123 was introduced in March of 2017. The bill has similarities to Colorado’s payday lending law, which consumer advocates consider to be exemplary. The new restrictions would guarantee that a borrower of $300 would pay no more than $96 in fees.
About one in ten adults in Ohio have taken out a payday loan. Many borrowers, especially low-income individuals, take out repeated loans when they can’t cover their expenses, trapping them in a cycle of debt. While industry lobbyists and other proponents of payday loans argue that there is a high demand for these products, consumer protections won’t necessarily eliminate payday loans as an option. Residents with bad credit in Colorado, for example, are still able to borrow money without paying exorbitant interest and fees.
To learn more about payday lending in Ohio, check out these related pages and articles from OppLoans:
- Akron Payday Loans
- Canton Payday Loans
- Cincinnati Payday Loans
- Cleveland Payday Loans
- Columbus Payday Loans
- Dayton Payday Loans
- Fremont Payday Loans
- Lima Payday Loans
- Toledo Payday Loans