Lenders aim for Ohio ballot issue

The industry doesn’t want to cut the high annual interest rate on payday lending.

COLUMBUS (AP) — The payday loan industry is bankrolling ballot issue campaigns in Ohio and Arizona to preserve the average 391 percent annual interest rates they charge, as the two states become the focus of industry watchers and consumer advocates.

The industry is trying to get an issue on the November ballot in Ohio to overturn a law that would cut the annual interest rate to 28 percent. Lenders have already succeeded in getting an issue on the Arizona ballot that would enable them to continue charging the higher interest rate. Without passage, the ability of lenders to charge 391 percent will expire in 2010 and they won’t be able to charge higher than 36 percent annual interest.

A total of 15 states and the District of Columbia have already adopted laws cracking down on payday lending. Four more states considering legislation, including Colorado and Virginia, are watching the ballot issues in Ohio and Arizona.

“It’s fair to say that a lot of people are going to look at it, and that a lot of people are going to draw conclusions on it,” said Uriah King, policy associate at the Center for Responsible Lending in Durham, N.C., a group that lobbies against payday lending. “Ohio is a bellwether state, so that, coupled with the ballot referendum, would make a powerful argument.”

The outcome of the initiatives in Ohio and Arizona will determine whether the payday industry believes it can go around lawmakers who have rebuffed them and present its case successfully to voters, said David Higuera, political director for the campaign opposing the industry ballot issue in Arizona.

“I do believe if they’re successful here they will go to many more state ballots next time,” Higuera said.

In Ohio, the state’s most powerful politicians — Gov. Ted Strickland, House Speaker Jon Husted and Senate President Bill Harris — have come out against the payday industry’s efforts. But the payday industry will do what they will not: spend a lot of money on television advertisements to influence public opinion.

The payday committee, registered as the Reject House Bill 545, is underwritten by the Community Financial Services Association, an industry group, which gave $850,000 to the campaign in June. Further fund-raising reports have not been required yet.

The payday industry has not yet gotten the required number of signatures certified to place the issue on the ballot in Ohio. But those fighting the industry efforts fully expect that they will.

Ohioans for Financial Freedom, the industry-backed group trying to get the issue on the ballot, agreed to strike 13,000 signatures from its total after opponents challenged signatures gathered by California-based Arno Political Consultants. And at least two Ohio counties checking the signatures said it was the lowest validation rate for a ballot issue in memory, even forwarding possible instances of fraud to county prosecutors.

Still, lenders turned in 422,000 signatures to Ohio Secretary of State Jennifer Brunner. They need only about 241,000 valid signatures to have the issue placed on the ballot.

Even if it’s discovered that lenders don’t have enough signatures later this week, they still have another 10 days to get the required number.

“It’s been a very challenging process, but we are working very hard,” said Kim Norris, spokeswoman for Ohioans for Financial Freedom.

Lenders have argued that payday loans are an individual financial choice that shouldn’t be taken away by lawmakers, running a series of ads that trumpet personal responsibility over government mandates. They have argued it’s a viable option for someone in a bind who needs quick cash to take care of an unforeseen problem, such as car trouble. Lenders also criticize the new law because it limits how many loans a customer can take out by enabling the tracking of financial decisions.

Opponents have said the industry’s business model is reliant upon trapping customers in a cycle of debt so they take one loan out after another to pay for the principle and interest on the previous loan.

In Colorado, a bill to cut the interest rate lenders can charge to 45 percent passed out of the House by a couple of votes this year but was watered down, and then killed, in the Senate.

“We had a tough-fought battle last session and I said I’m probably bringing something back next year, so I’ll be watching what happens in other states,” said state Rep. Mark Ferrandino, a Denver Democrat.