Remove roadblocks to real, lasting payday-loan reform
When it comes to respond- ing to responsible and repeated calls for reform in the predatory payday-lending industry, it looks as if most of our state and federal legislators have rolled over and played dead.
How else explain the inability of Ohio state lawmakers to enact any meaningful and popularly supported reforms to rein in an industry that extorts its borrowers with interest rates soaring to 500 percent and beyond?
Or how else explain the plans of Republican lawmakers in the U.S. Congress to repeal strong consumer protections for payday borrowers put in place during the Barack Obama presidential administration in the then-new Consumer Financial Protection Bureau? That agency was headed by Richard Cordray, now a leading Democratic party candidate for Ohio governor.
Such lethargy on the part of our representatives in Columbus and Washington elected to serve the will of the people is shameful. And the will of the people of Ohio resonated loudly and clearly 10 years ago when a consumer-lending backed effort to repeal a 2008 law that restricted payday-loan interest rates to 28 percent failed miserably at the polls.
Lenders then chose to coyly circumvent the popularly supported law by making their same old predatory loans under another section of law, the Mortgage Loan Act that has no cap on interest rates and allows loan repayment to be demanded in one lump sum.
In the ensuing 10 years, there’s been much talk but no meaningful action to better regulate the estimated 650 payday lending stores in Ohio, including some three dozen in the Mahoning Valley.
Efforts by conscientious legislators who’ve introduced bills to implement meaningful reforms have languished in Republican-controlled committees until dying at the end of each two-year session of the General Assembly.
Meanwhile, the payday industry has at least a dozen Statehouse lobbyists that have contributed handsomely to the campaign coffers of representatives and senators. According to the Columbus Dispatch, that industry has given more than $1.6 million in disclosed contributions, mostly to Republicans, since 2010.
Today, the industry continues its assault on those who challenge its ill-earned profits, taking aim at House Bill 123. In its original format, it would have closed the 2008 loophole and capped interest rates at 28 percent. After languishing in committee for more than a year now, sponsors have revised the bill to make it easier for lenders to evade its otherwise get-tough provisions.
Wise legislators, however, will resist such efforts to dilute its impact.
Elsewhere in Ohio’s fray, the Community Development Corporation Association is planning to place a statewide initiative on the ballot in November that calls for a constitutional amendment to limit payday interest rates to 28 percent and to tightly close any and all loopholes.
Nate Coffman of the Ohio CDC states the case for reform succinctly: “It seem like they [legislators] don’t care that every day House Bill 123 doesn’t move forward, it costs Ohioans an average of $200,000 in excessive borrowing costs, or about $75 million annually. That’s not acceptable. And that’s why we are pushing for a ballot issue.”
Despite Coff’s good intentions, we generally have not embraced such narrow amendments to alter the intended broad structure of the state’s constitution. We believe the legislative process would be the best mechanism to achieve success and hope lawmakers will soon choose to put the will of the people ahead of the political spoils from the short-term loan industry.
Sadly, the intransigence on display in Columbus also raises its ugly head in Washington. In the first year of President Donald Trump’s administration, many strict payday-lending regulations have been softened or overturned.
Now bills in the U.S. House and Senate seek to repeal a federal rule from the CFPB that requires lenders to authorize loans only after they have determined that borrowers can reasonably be expected to pay the loan back. That effort mustn’t gain traction.
U.S. Sen. Sherrod Brown praised that rule, saying it will “crack down on shady payday lenders” and “help put an end to their abusive practices.”
As the infighting drags on, the damage to many poor and working-class households worsens. It is now incumbent upon federal lawmakers to preserve the CFPB protection and for state legislators in Ohio to embrace and enact the original taut and airtight reforms proposed in HB 123.