Ten years ago, Ohio voters expressed their disdain for the predatory payday lending industry by reaffirming a state law that restricts the annual interest rate for payday loans to no more than 28 percent.
But the decade has not given the most economically vulnerable residents the break they deserve. That’s because the lenders have circumvented the law by doing business under the Mortgage Loan Act. As a result, they have continued to charge 500 percent interest rates and have been able to demand repayment in one lump sum.
Thus, the more than 600 payday lending stores in Ohio – there are about three dozen in the Mahoning Valley – have been rolling in the dough.
There has been a lot of talk by many people in and out of government about the need to close the loophole in the state law, but nothing was done.
That is until last week, when the Republican-led Ohio House of Representatives passed by a large margin a bill that closes the loophole that has enabled lenders to charge much more than 28 percent interest.
The measure had languished in the House for 15 months, but things changed a couple of months ago when it became known publicly that the FBI is investigating former Speaker Cliff Rosenberger’s travels overseas with payday-lending industry lobbyists.
Rosenberger resigned but denied his departure had anything to do with the investigation.
However, with Democrats latching on to the FBI probe as one more example of the pay-to-play climate facilitated by Republicans in Columbus, leaders in the House were hard-pressed to ignore the payday lending issue.
Thus, on Thursday, the bill cracking down on payday lenders passed by a vote of 69-14.
The legislation now goes to the Republican-dominated Senate, where the payday lending industry will attempt to water down the measure.
PROVISIONS OF BILL
Here are some of the provisions in the bill as detailed by Cleveland.com (The Plain Dealer):
Loans could not exceed $500, and interest is capped at 28 percent annually.
Lenders could charge a monthly maintenance fee of $20 or 5 percent of the first $400 borrowed, whichever is less.
The total monthly payment including fees and interest could not exceed 5 percent of the borrower’s gross monthly income or 6 percent of monthly net income.
The total amount of fees and charges could not exceed 50 percent of the original loan amount.
Lenders could collect damages for unpaid loans in court but not more than the original loan amount.
Borrowers could cancel loans by 5 p.m. the next business day and repay loans early without penalty.
House Bill 123 is clearly designed to not only rein in the payday lending industry but to keep faith with Ohioans who went to the polls and reaffirmed the law passed a decade ago.
But it would be foolhardy to assume that Republican leaders in the Senate will rush the bill to passage. Industry lobbyists aren’t going to shrug off the attack on the goose that has been laying the golden egg.
Aware that the bill could still be derailed in the Senate, a coalition of faith-based groups and advocates for low-income Ohioans is preparing to take the fight to the people.
Ohioans for Payday Loan Reform is working on a constitutional amendment that would restrict the lenders.
Before the House’s passage of the measure, Nate Coffman of the Community Development Corporation Association said, “It seems 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.”
The bottom line is this: The majority of Ohioans believe that the predatory lending practices of the payday industry are obscene and must end. They are angry that 10 years have passed since they affirmed the state law that set an interest- rate ceiling of 28 percent, and nothing has changed.
But now there’s light at the end of the tunnel. House Bill 123 is exactly what Ohioans have been demanding.
Therefore, the Republican-controlled Senate has no choice but to pass the measure without delay. The races for governor and other statewide offices are just around the corner, and voters will stand in judgment.