Hagan: We were hoodwinked

By Marc Kovac | March 12, 2009 at 12:00a.m.

Rep. Robert F. Hagan, D-Youngstown. (AP Photo/Larry Phillips)

The lawmaker from Youngstown admitted he was embarrassed.

COLUMBUS — A Democratic state lawmaker who sponsored legislation last session to limit high-interest payday lending said Wednesday he was embarrassed that the storefront lenders continue to operate throughout Ohio.

“The process was supposed to be a significant change, to bring [the annual percentage rate charged down] to 28 percent,” said Rep. Bob Hagan of Youngstown, D-60th. He added, “I think we were hoodwinked by a lot of people.”

Hagan was one of the primary sponsors on a bipartisan bill that would have capped interest at about 36 percent, in line with what the federal government already has instituted on military borrowers.

Ultimately, a Republican-sponsored bill was passed by the legislature and signed by Gov. Ted Strickland that, among other provisions, capped the annual percentage rate charged on short-term loans at 28 percent.

“I think we were hoodwinked by a lot of people. There was a wink and a nod, and the Republicans said well we’ll do it, we’ll go down to 28 percent and cut Hagan and the rest of them right out. And, you know, Bill Batchelder and I were sponsors of it, and we found out that we were used a little bit.”

Lenders have skirted the new law by obtaining licenses under other two laws — the Small Loan Act and the Mortgage Loan Act.

A report released this week by the Housing Research and Advocacy Center, a Cleveland-based nonprofit, noted that more than 1,000 payday lenders are still in business in the state and charging annual percentage rates as high as 680 percent.

“They seem to have won on legal terms,” Hagan said. “But I think there will be some challenges, and all of us are working again together to try to bring it down to an honest 28 percent.”

He added, “It’s embarrassing, it’s wrong and the people of the state of Ohio have said as loud as they could that they didn’t want this type of payday lending industry to operate in the state of Ohio.”

Gov. Ted Strickland, Attorney General Richard Cordray and some lawmakers have already voiced support for new legislation dealing with the issue.