Ohio Senate must not bulldoze taut reforms for payday lenders

Some payday lenders in the Mahoning Valley and throughout Ohio are no doubt sitting pretty these days, thinking that efforts to rein in the shady practices of some in their industry have been torpedoed.

Unfortunately for the interests of fairness and consumer protection, their reasoning looks to be sound.

That’s because the Ohio Senate has been stonewalling efforts to curb the unscrupulous gouge-the-consumer antics of such lenders merely through its inaction.

Specifically, the Senate has failed to schedule any hearings on House Bill 486 sponsored by Democrat Matt Lundy of Elyria, a bill that passed with bipartisan support in the Ohio House more than two weeks ago.

Sound provisions of the bill

Lundy’s bill closes several loopholes in the payday-lender reform act approved by the state Legislature two years ago on June 2, loopholes that have permitted these lenders to carry on business as usual.

It’s unlikely that the bill can wind its way through the Senate before the General Assembly adjourns for summer recess in two weeks. After all, it took nearly a year to achieve passage in the House.

House Bill 486 would bar lenders from issuing loans by check and then charging a fee to cash the check. It would prohibit charging origination, credit-check and other fees during a 90-day period for checks less than $1,000. Lenders would also be prevented from charging broker fees, supposedly for credit-repair counseling.

Thwarting discussion, debate and a final vote on these safeguards in the Senate not only allows the shameless lending practices with sky-high costs to consumers to continue, it also subverts the will of the Ohio electorate.

Although the initial reform law to cap interest on payday loans at 28 percent was passed in June 2008, the legislation faced a statewide referendum challenge that November. In that election, 64 percent of Ohio voters approved keeping the law intact.

Immediately thereafter, some payday lenders began to adopt some of the aforementioned practices not specifically outlawed in the act that allowed them to keep their profit margins high, while keeping legions of Ohioans in a vicious cycle of long-term debt.

WHAT OPPONENTS SAY

Opponents of the consumer safeguards in payday lending say they will cost Ohio jobs just as the state is beginning to rebound from recession. Some urban Democrats argue the reforms would hurt their constituents who would have nowhere to get credit if payday lenders went out of business.

The intent of the reforms, however, is not to shutter all of the corner-store, fast-cash businesses. Clearly there is a need for quick short-term loan services, or payday lending would not have mushroomed into a growth industry in the state and the nation. The intent is to protect consumers — many of whom are in dire financial straits — from financial exploitation.

As we approach the second anniversary of passage of the original payday lending law in Ohio, we would implore Republican state Sen. Steve Buehrer, chairman of the Senate Insurance, Commerce & Labor Committee, to schedule hearings on the bill so that it has a fighting chance of making it into law by year’s end. Only then will the wishes of the General Assembly and of the majority of Ohio voters finally be granted.