Measure to protect Ohioans from payday loans timely

It has been said many times before in this space, but it’s worth repeating: Ohio has the highest payday loan rate in the nation, with an APR (annual percentage rate) of interest topping 590 percent.

That eye-popping fact prompted Ohio voters to approve a referendum by a 63 percent majority upholding a 2008 state law that set a maximum annual interest rate of 28 percent on payday loans.

But, payday lenders weren’t about to let anyone kill the goose that has been laying golden eggs for them for so long. They found a loophole that enabled them to write loans under state laws covering second mortgages or by calling themselves credit-service organizations. In 2014, the Ohio Supreme Court unanimously upheld the lenders’ ability to do so.

But today, there is light at the end of the dark tunnel that is the payday lending scandal.

A bipartisan bill has been introduced in the Ohio House of Representatives to make loans affordable by ensuring monthly payments do not exceed 5 percent of a borrower’s gross monthly income.

“Our proposed reforms would bring stratospheric borrowing costs back down to earth from their hyper-inflated current levels,” said Rep. Kyle Koehler, R-Springfield, one of the sponsors. He noted the adjustments are long overdue. “They will help our state’s hard-working consumers using a proven model that will still preserve access to credit in Ohio.”

More than 1 million Ohioans have taken out high-cost payday loans, with $300 being the average amount for five months. But at the end of the loan period, repayment amounts to $680 in interest and fees alone.

“Unfortunately, many payday lenders are geared toward taking advantage of households that are living paycheck to paycheck,” said Rep. Mike Ashford, D-Toledo, a co-sponsor of the bill. “For too many families, this makes it impossible to pay off the 591 percent loans and, as a result, Ohioans are living behind the financial eight ball for a long time. We hope to change that with this legislation.”

The bill, which the Republican majority in the House and Senate should put on a fast track given that Ohioans have already spoken, sets a maximum of how much lenders can charge.

The legislation limits the annual interest rate to 28 percent plus monthly fees of 5 percent on the first $400 loaned, or $20 maximum.

SUPPORTERS ABOUND

State lawmakers who undoubtedly will be pressured by the payday lending industry to deep-six the measure would do well to consider the organizations that are urging its passage: Ohio Job and Family Services Directors Association; Ohio Council of Churches; Catholic Conference of Ohio; Ohio Poverty Law Center; and Ohio CDC Association, a statewide membership organization of Community Development corporations.

Veterans service groups also have voiced their support for the reform law, pointing out that veterans who can’t pay off the payday loans turn to them for help.

“Many of the veterans we assist at the commission find themselves trapped into a cycle of borrowing money that has no easy exit and can be very expensive,” said Jon Reiss, executive director of the Cuyahoga County Veterans Services Commission. “We are hopeful that today’s proposed legislation will result in reasonable lending programs that provide relief to financially challenged veterans as well as all Ohio citizens.”

If such testimony doesn’t persuade lawmakers to approach the legislation with a sense of urgency, consider this comment from Carl Ruby, senior pastor of Central Christian Church in Springfield and director of the Ohio Coalition of Faith Leaders for Lending Reform:

“Now is the time for us to end practices that prey upon the most vulnerable members of our communities. I, and many other faith leaders from across Ohio, strongly support this bill because it ends the practice that price-gouge families, trapping them in long cycles of debt.”

Last month, supporters of reform were disappointed when Republican lawmaker Marlene Anielski who had vowed to go after the payday lending industry decided not to sponsor such a bill.

Anielski told Cleveland.com that while she continues to believe it’s an important issue, she decided to focus on suicide prevention.

However, with a Republican and Democratic member of the House joining forces, Ohio may well be on its way to shedding its reputation as the state where financially challenged individuals are gouged with abandon.