Ohio payday loan law changes face political challenges – news – the Columbus Dispatch
A number of Ohio lawmakers say they recognize the need to change the failed Ohio payday loan law, but questions remain as to what measures they are prepared to support.
No payday lender in Ohio is registered under the Short-Term Loans Act that lawmakers approved and voters overwhelmingly supported in 2008. Over 600 stores across Ohio use other sections of the law, not designed for payday lenders, and critics say they charge up to 600% annual percentage rates for borrowers who are desperate for money.
“I was not sent here to represent businesses that are mostly owned by out-of-state entities that charge Ohioians much more than they charge consumers in other states because of a loophole.” Rep. Kyle Koehler, R-Springfield, told a House committee on Wednesday. “I was sent here to represent the citizens of Ohio.”
Koehler and Representative Michael Ashford D-Toledo hope Wednesday’s hearing will kick off a process towards a state payroll law that lenders have made ineffective.
The bill would allow short-term lenders to charge an interest rate of 28% plus a 5% monthly fee on the first $ 400 loaned. Monthly payments could not exceed 5 percent of a borrower’s gross monthly income.
Salary critics say short-term loans trap people in a cycle of debt, where borrowers repeatedly need new loans to pay off old ones.
Pastor Carl Ruby of Central Christian Church in Springfield, a member of a coalition supporting the bill, said he saw the pain of payday loans, including a woman considering suicide when $ 500 loan turned into thousands of debt.
“I think morality and the facts are on our side,” he said.
“People who go to payday lending centers are desperate. They don’t understand the cost and fees they incur.
The bill will cut off access to credit, said Pat Crowley of the Ohio Consumer Lenders Association, which represents payday lenders. “There is no alternative for many of these people. “
The bill is based on a Colorado law, where reform supporters say many convenience stores are still operating. The top Republicans in the House are signaling amendments are likely.
“There is a desire to make changes to the payday loan law,” said Rep. Kirk Schuring, R-Canton, the No.2 House leader. don’t know yet. “
Rep. Bill Seitz, R-Cincinnati, said he was not convinced the bill was the right approach.
“We all recognize this is a problem, but the question is what are you doing about it,” he said.
Some ideas, Seitz said, are to codify a new federal rule banning loans for less than 45 days. There is also talk of a payroll tax to create a financial literacy fund.
The issue may find support in the Senate as well, especially if a coalition supporting the bill is heading towards a voting issue.
“I think we would be interested in looking at potential reforms in this area,” Senate Speaker Larry Obhof, R-Medina said. “Obviously we’ve also heard about the potential of a ballot initiative, and my preference is always that if something can be dealt with by law, it should be.”
The wage reform is a political challenge.
The breakdown industry has donated significant campaign funds. The issue divides both sides equally – Republicans and anti-regulation Democrats fearing to cut credit are reluctant to support the changes.
The Cleveland Clergy Coalition, a group of 85 African American churches and 10 religious organizations, opposes the bill. Meanwhile, the Cleveland branch of the NAACP has approved it. A key disagreement is whether the bill would cut credit.
“In the African American community there are no financial opportunities because the banks have left us,” said Pastor Aaron Phillips of Sure House Baptist Church. “A lot of times people use it as a tool to pay their rent, their car bills or to keep their lights on. If they don’t have that, they won’t have anything.
Without payday lenders, people will resort to loan sharks, Phillips said. “The (payday) fees are much lower than what you would have on the street. “
Danielle Sydnor, a member of the Cleveland NAACP executive committee, said she agreed there was a need for small loans, but the current industry “is attacking our neighborhoods.”
“When you play on the fears of individuals who have difficulty accessing traditional credit, it is really easy to make them feel that if it goes away, they will have nothing at all,” she said.
But most of the same lenders operating in Ohio, Sydnor said, also operate in other states with lower fees.
“Are they all going to leave?” Absolutely not, “she said.” It will put our citizens in a better position because you will have a few places with better processes in place, and there won’t be six or seven trying to get you to. every turn. “