As Ohio Payday Credit Act Fails, Some Legislators Ready For New Regulations – News – The Columbus Dispatch

Nine years after Ohio lawmakers and voters approved restrictions on payday loan fees for short-term loans, those fees are now the highest in the country.

Ohio’s 2008 Payday Loan Act was ineffective. The question now is whether the legislature is ready to deal with it.

Lenders avoided the law’s 28 percent loan interest limit by simply registering under various sections of state law that weren’t designed for payday loans, but that allowed them to charge an average annual interest rate of 591 percent.

Low- and middle-income Ohioans who borrow $ 300 from a payday lender pay an average of $ 680 in interest and fees over a five-month period. Weekly loan, according to research by The Pew Charitable Trusts.

Borrowers in Michigan, Indiana, and Kentucky pay $ 425 to $ 539 for the same loan. Pennsylvania and West Virginia do not allow payday loans.

In Colorado, which passed a payday loan bill in 2010 that Pew officials would like to see replicated in Ohio, the fee for this $ 300 loan is $ 172, an annual interest rate of about 120 percent.

The Colorado-style regulation is part of a new bipartisan bill aimed at lowering fees and giving Ohio borrowers more time to repay their loans.

“Local community organizations know that a growing number of payday lenders is a sign of a troubled community,” said Nick Bourke, director of Pew’s small dollar loan project.

Reps. Kyle Koehler, R-Springfield, and Michael Ashford, D-Toledo, sponsor House Bill 123. It would allow short-term lenders to charge 28 percent interest plus a 5 percent monthly fee on the first $ 400 that are borrowed – a $ 20 maximum rate. The monthly payments required must not exceed 5 percent of a borrower’s gross monthly income.

It would also put payday lenders under the Short-Term Loan Act instead of making them work as mortgage lenders or credit services companies.

Koehler said local religious leaders began talking to him about the issue more than a year ago.

“As state lawmakers, we need to watch out for those who are injured,” he said. “In this case, those who are injured go to payday lenders and are taken advantage of.”

In contrast to previous payday discussions, which focused on whether to slacken the industry – a tough debate that divides both Democrats and Republicans – Koehler said the bill would keep the industry viable.

“There are people who need that kind of credit,” he said.

After Colorado passed its law in 2010, more than half of the state’s payday businesses closed. But those who stayed saw businesses grow, Bourke said, and people in need of short-term credit still have plenty of access.

Some national payday lenders that operate in Ohio also have businesses in Colorado. For example, borrowing $ 300 for five months from Ace Cash Express costs a borrower in Ohio $ 879 but in Colorado it costs $ 172, Bourke said.

“These companies charge the Ohioans five times more … just because the law allows them,” Bourke said, estimating the Ohio bill would save borrowers $ 75 million a year.

Ohio has about 650 payday businesses, including title lenders, who use auto titles as collateral.

“They are set up in such a way that you cannot really pay off the loan,” said Köhler. “Most of the problems are caused by the idea that you have to pay it off in two weeks.”

Köhler said that colleagues kept asking him: Didn’t we take care of it in 2008? The Short Term Loan Act, which was created this year, limits the interest rates on payday loans to 28 percent, but zero-payday lenders operate under this section of the law.

Only nine of the 99 current House MPs were in office in 2008.

“There is no natural electorate struggling to resolve this issue, but there is a very aggressive payday loan lobby struggling to maintain its status,” said Bourke.

Since 2010, the payday industry has donated more than $ 1.5 million to Ohio campaigns, mostly to Republicans. That includes $ 100,000 in a bipartisan campaign to redistribute the legislation in 2015, making it the largest donor.

New restrictions “will only harm the consumers the legislation is supposed to support by eliminating credit options and exposing consumers to more expensive options such as activities,” said Patrick Crawley, spokesman for the Ohio Consumer Lenders Association.

Spokesman Cliff Rosenberger, R-Clarksville, said he was meeting with various parties to learn more about the need for the bill.

House Minority Group leader Fred Strahorn, D-Dayton added, “I’m in favor of making it a good product for the people, but there are too many underserved and underserved people. We need to focus on making good financial products and not dissuade ourselves from driving people out of business. ”

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