House votes to close payday loan loophole
The Ohio House on Wednesday, May 12, voted 61-37 in favor of a new crackdown on payday lenders who found ways to continue to charge high fees to low-income borrowers.
While Gov. Ted Strickland supports the bill, its fate in the GOP-controlled Senate is uncertain.
Opponents say the bill is a paternalistic attempt to control consumer choice and will dry up a source of credit for low-income Ohioans.
“When you dry up capital in my community, you’re going to cause folks to go back to the loan sharks,” said state Rep. Clayton Luckie, D-Dayton, who is proposing a more lenient bill.
Proponents say strict rules are needed to keep payday lenders from taking advantage of people and trapping them in debt.
“This is the crack cocaine of the financial institutions,” said state Rep. Dan Stewart, D-Columbus. Access to this kind of credit perpetuates poverty, he said.
Payday lenders had been charging 391 percent annual interest rates on short-term loans. In 2008, lawmakers put a 28 percent APR cap on such loans. Payday lenders tried to overturn the law but in November 2008, Ohio voters endorsed it by nearly a 2 to 1 margin.
This led to about 640 of Ohio’s 1,600 payday lending stores closing their doors and cutting 2,600 workers. Many of those remaining, however, are making money by now offering loans under other sections of Ohio law and charging extra fees.
The bill passed by the House would eliminate some of those extra fees. The bill would prevent payday stores from: charging check-cashing fees for checks they issued, charging loan origination or credit check fees more often than every 90 days, charging a membership fee, and for brokering loans for other organizations.
Rob Grieser, vice president of government affairs for CheckSmart, a payday lender based in Dublin, Ohio, said the latest round of restrictions in the bill would have a “severe” impact on revenue and likely drive more stores out of business.
Source: Springfieldnewssun.com
