Bill to close loophole for payday lenders

By Marc Kovac

The bill would stop payday lenders from using the Small Loan Act and Mortgage Loan Act.

COLUMBUS — Legislation being introduced at the Ohio Statehouse is aimed at stopping former payday lenders from using a loophole in state law to charge high rates on short-term loans.

Rep. Matt Lundy, a Democrat from Elyria, plans to offer the bill this week, with hopes that it will pass before lawmakers break for the summer.

Legislation passed by lawmakers and signed by the governor last year was supposed to cap the annual percentage rate charged on short-term loans at 28 percent.

The new law also limited the number of loans that could be issued to individual borrowers, prohibited obtaining new loans to pay off old ones and require consumer education courses for repeat borrowers.

But a study released in March by the Housing Research and Advocacy Center, a Cleveland nonprofit agency, stated that there were more than 1,000 payday lenders still doing business in Ohio and offering short-term loans at inflated rates.

Those lenders are operating under the state’s Small Loan Act and Mortgage Loan Act, both of which allow them to charge rates comparable to or higher than those allowed under the prior payday lending law.

Lundy’s bill is an attempt to stop those activities. The legislation would prohibit fees or interest of more than 28 percent on loans of $1,000 or less issued for 90 or fewer days.

It would also stop lenders from charging check-cashing fees on loans they are issuing to borrowers.

Fines for lenders who violate the law would be upped to a maximum of $1,000, from the current cap of $500.

Advocates who pushed for the payday lending reform passed by the Legislature and signed by Gov. Ted Strickland a year ago are supportive of the move.