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Stalled-out payday lending reform moves in Senate

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COLUMBUS — The Ohio Senate will briefly interrupt its summer recess Tuesday to jump-start a stalled bill targeting payday lenders amid finger-pointing as to who really stands to gain by the move.

The Senate Finance Committee on Monday adopted an amendment that a supporter described as “minor tweaks” to House Bill 123. The committee is expected to send the revised bill to the full chamber Tuesday.

It remains to be seen whether the House will interrupt its own summer recess to get the amended bill to Gov. John Kasich’s desk.

“Predatory lenders toss out what appears to be a life ring, but instead it is an anchor,” said Carl Ruby, pastor of Central Christian Church in Springfield and a leader in a coalition pursuing a ballot issue for reform of the industry.

As amended, House Bill 123 would, among other things:

■ Cap annual interest rates at 28 percent on short-term loans of up to $1,000, double the bill’s original loan cap.

■ Cap monthly maintenance fees charged at 10 percent of the original principal borrowed or $30, whichever is less.

■ Limit the maximum life of a loan to one year.

■ Allow for no loans with less than a three-month repayment schedule unless the monthly payments, counting interest and fees, do not exceed 7 percent of the borrower’s monthly income or 6 percent of gross income.

■ Limit a borrower to never having more $2,500 in outstanding principal.

The Senate worked with the Pew Charitable Trusts on proposed amendments to the bill, even as the industry has accused the think-tank of conspiring with credit unions to put their competitor out of business.

“I can emphatically state HB 123 is a completely untested piece of legislation ...,” said Cheney Pruett, founder and CEO of lender CashMax, which employs 300 Ohioans.

“Overly restrictive loan limits coupled with insurmountable rate caps guarantee our demise, and I am unwilling to believe this comes as a surprise to a billion-dollar research institute,” he said.

Pew has estimated that Ohio has the highest payday lending rate in the nation at 591 percent when fees on what are initially supposed to be short-term loans are extrapolated over a year. The industry accuses the researcher of selecting worst-case scenarios to make its case.

The bill is designed to make it less likely that borrowers will get trapped in a cycle of continuously rolling over the loans as interest and fees add up.

Nick Bourke, Pew’s consumer finance director, said the amended bill moves a bit in the direction of the industry.

“To be clear, this amended bill will not be perfect,” he said. “Its provisions for affordable payments and lower costs are not as strong as the original bill, and it allows lenders to tack on a [$10] back-end fee for cashing their own loan origination checks. But HB 123 as amended will be a very good bill.”

Rep. Michael Ashford (D., Toledo), who sponsored the bill with Rep. Kyle Koehler (R., Springfield), said Monday he will lobby for a prompt return of the House if the Senate-passed version is acceptable.

“Absolutely, I will have a conversation with Rep. Koehler to make sure he goes to the majority leadership…,” he said. “[This bill] would be a significant change in protecting consumers in the state of Ohio.”

The Senate amendment marks the first substantive change to the bill. The new leadership in the House passed it last month without a single change to avoid being tainted by the controversy that forced the resignation of former House Speaker Cliff Rosenberger (R., Clarksville) earlier this year.

The FBI is looking into his international travel and other spending involving payday industry lobbyists.

Contact Jim Provance at jprovance@theblade.com or 614-221-0496.

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