Ohio Senate Republicans score one for the citizenry

Our immediate reaction to last Tuesday’s unexpected vote by the Ohio Senate to rein in payday lenders came in the form of a question: Why is the Republican majority doing this?

But then we took a step back and realized that the reason wasn’t important because the outcome of the vote is a clear victory for Ohioans who have been preyed upon by predatory lenders.

On June 28, we published an editorial that was harshly critical of the GOP majority. It carried this headline: “Senate Republicans cave in to payday lending industry.”

Here’s what the opening two paragraphs of the editorial said: “Any way you look at it, the decision by Republican leaders in the Ohio Senate to postpone a vote on a payday-lending regulation bill is a huge victory for predatory lenders.

“Of course, the industry would like the legislation to simply disappear into the political ether, but they will settle for the next best thing: Delay.”

Thus, our genuine surprise when the bill – it originated in the House as HB 123 – was not only brought to the floor for a vote, but was approved by a whopping 21-9 margin.

Early last month, the Republican- controlled House passed the measure on a 69-14 vote. The bill had languished in the House for 15 months, but things changed in May when it became known that the FBI was investigating former GOP Speaker Cliff Rosenberger’s travel overseas with payday-lending industry lobbyists.

Resignation

Rosenberger resigned, but denied that the ongoing investigation had anything to do with his departure.

The bill was sent to the Senate, where the payday-lending industry pulled out all the stops to either kill it or water the measure down to such an extent that it would be rendered meaningless.

There are several provisions in the bill that the lenders find objectionable, especially the one that prohibits them from charging more than a 28 percent interest rate for loans up to $1,000 for up to 12 months.

It will be recalled that Ohio voters a decade ago reaffirmed a state law that restricts the annual interest rate for payday loans to no more than 28 percent.

But lenders found a way to circumvent that law by doing business under the Mortgage Loan Act. As a result, they have continued to charge more than 500 percent interest and have been able to demand repayment in one lump sum.

There are more than 600 payday lenders in Ohio, including about three dozen in the Mahoning Valley.

The industry has been able to flex its muscle on the Republican side of the aisle in the General Assembly, but the FBI’s investigation of Rosenberger has changed the political landscape.

Democrats have been pounding away at the fact that the GOP had given payday lenders a pass until the passage of House Bill 123.

The Senate has made a few minor changes to the legislation, which means the House must give its approval.

The House is on recess and is expected to return in September to tackle unfinished business. The payday lending industry isn’t going to walk away from this fight, which means pressure will be brought to bear on legislators.

However, we believe that in light of the clear message sent by Ohio voters a decade ago and the joining of forces by numerous grass-roots and community-based organizations, HB 123 will become law.

Ohio Gov. John R. Kasich, a Republican, will undoubtedly sign the bill because payday lenders prey on the economically vulnerable he has fought so hard to assist.

About 1 million Ohioans have taken out a payday loan at some point, using the short-term, high-cost credit available to those who need fast money but might not qualify for a traditional loan.

Vicious cycle

The high fees and interest force many low-income borrowers to re-borrow money, with new fees, to pay off prior loans.

Under HB 123, a typical borrower getting a $500 loan would pay about $125 a month for six months for a total of $750.

By comparison, the industry was pushing for an amendment that would have required repayment of $650 within 30 days on the $500 loan, The repayment total would have risen to $1,135 if the loan were stretched out to six months.

Republicans in the Ohio Senate and House were under intense pressure from the payday lenders to make HB 123 go away, and for a while it appeared they had succeeded.

Now, however, with passage of the measure in both chambers, the days of predators taking advantage of the economically distressed will soon be over.