Toledo Dem finds GOP help for bill to limit payday lending

3/11/2017

COLUMBUS — State Rep. Michael Ashford (D., Toledo) has finally found a Republican partner in his effort to plug the loopholes so-called payday lenders have punched through state law.

But that doesn’t mean the bill and its new limits on interest rates and fees that short-term lenders may charge customers will be brought to a floor vote by majority Republicans anytime soon.

“This is the first time anybody from the GOP has reached out and made this an issue to discuss,” said Mr. Ashford of the decision of Rep. Kyle Koehler (R., Springfield) to place his name first on the bill.

“Whether or not it gets votes, this is still a good signal that folks are thinking about this issue in the state,” Mr. Ashford said.

The General Assembly nine years ago passed a law it thought would address concerns that so-called payday lenders were charging exorbitant interest rates, when adjusted to an annualized figure for comparison purposes with other lenders.

Lawmakers heard stories from customers with cash-flow issues who took out short-term loans to cover them until their next paychecks only to be caught up in a cycle of repeatedly rolling over those loans and watching their debt and payments climb.

The industry, however, countered that it offers a valuable, higher-risk service to working Ohioans not served by other lenders. It argues that, used responsibly over the short term, borrowers don’t pay interest rates close to the annualized figures.

“The Ohio Consumer Lenders Association is committed to making sure hundreds of thousands of under-banked Ohioans, who are overwhelmingly satisfied with our products and services, continue to have access to affordable credit options,” association spokesman Patrick Crowley said.

“Any new legislation that imposes restrictive caps or onerous regulations will do nothing but harm the very consumers the legislation is designed to assist by eliminating credit options and exposing consumers to more expensive options such as unregulated offshore Internet lenders, overdrafts, utility shut-off fees, or worse — illegal lending activities,” he said.

While Mr. Ashford is confident the House’s 33 Democrats will support the bill, he doesn’t know where it stands with the 65 Republicans beyond Mr. Koehler. 

Ohio has the highest payday loan rates in the country — 591 percent when the short-term interest rate is annualized, according to a December study by Pew Charitable Trusts.

Ohio has more than 650 payday loan storefronts in 76 counties.

The bill would cap the annual interest rate of such loans at 28 percent plus monthly fees of 5 percent on the first $400 in principal or $20 total. It would prohibit monthly loan payments from exceeding 5 percent of the borrower’s gross monthly income.

A similar measure was employed in Colorado where payday interest rates have fallen, according to Pew.

Meanwhile, Toledo City Council has discussed the idea of limiting such lending operations through zoning. One proposal would limit them to one for every 30,000 city residents and requiring a distance of at least 2,000 feet between each of them.

As of November, the city had 37 such lenders and auto-title lenders in the city, one for every 7,630 residents.

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