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Published: Friday, 8/8/2008

Fight takes shape on Ohio payday loan law


COLUMBUS - The battle has yet to be engaged, but backers of a new law restricting what the payday-lending and cash checking industry can charge on short-term loans have begun gathering their army.

The industry is on the streets now gathering signatures in hopes of putting a question on the Nov. 4 ballot that would ask voters to repeal part of the law set to go into effect on Sept. 1.

Gov. Ted Strickland, a Democrat, yesterday joined forces with House Speaker Jon Husted (R., Kettering) and Senate President Bill Harris (R., Ashland) as honorary chairmen of the campaign to defeat what they suggested could be a $16 million effort to kill the law.

"We did not ban small consumer loans,'' said Mr. Husted. "Rather we capped the interest rate at a level that created a reasonable expectation that the borrower could pay it back. They wouldn't be trapped in a cycle of debt. We didn't ban small loans. We banned a defective product.''

The industry, however, countered that some payday lenders are already closing up shop in Ohio and that the law could cost the state as many as 6,000 jobs.

"Consumers know what they're doing,'' said the repeal effort's spokesman, Kim Norris. "They come in, they take out a $100 loan, and they pay $15 on that loan. It's a short-term loan, and they pay it back in two weeks. That's what 90 percent of customers do.''

She noted the law eliminates a choice for borrowers who face short-term cash-flow problems and prefer a flat $15 fee to higher credit-card interest rates or potential bounced-check fees.

Critics of the practice argue that many borrowers can't afford the loans and find themselves taking out another payday loan to pay off another. If extended over a year through multiple loans, that flat $15 fee translates into an annualized interest rate of 391 percent, they say.

The section of House Bill 545 targeted by the repeal effort would cap the interest charged at an annualized 28 percent and limit the number of loans a borrower can take out in a year. While the industry contends the cap is not high enough, many have already applied to the Department of Commerce to convert their licenses to new small-loan licenses created under the terms of the new law.

The payday lending industry is paying petition circulators by the hour to gather a minimum of 241,365 valid signatures of registered Ohio voters by Aug. 31 to put the question on the ballot. The filing of petitions would at least temporarily prevent that section of the law from taking effect as scheduled.

It remains to be seen whether the effort will qualify for the ballot. If it does, it could be one of six statewide issues on what is already a crowded presidential year ballot.

Voters are also expected to be asked to legalize a single casino in southern Ohio, mandate seven days of paid sick leave for most workers, clarify private property water rights, borrow $400 million for polluted site cleanup and green space preservation, and rework the calendar for future voter-initiated ballot questions.

Contact Jim Provance at:


or 614-221-0496.

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