Lawmaker proposes payday lending changes
Friday, April 25, 2008
Springfield, Ohio — State Rep. Chris Widener will announce a plan on Monday, April 28, that will combine pieces of payday lending bills.
His plan calls for eliminating the current payday lending law and instead revising the existing Small Loan Act.
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"The current (law), as it was laid out in 1995, is 13 years old and is not working," said the Springfield Republican who chairs the House Financial Institutions committee.
His suggestions include adding two loan products to the Small Loan Act.
One, taken from one of the three payday lending bills, would create a small loan linked deposit program.
That would allow lenders to work with the state treasurer to provide up to $800 loans with 90 day terms and an annual percentage rate capped at 36 percent.
The other product would be a 31-day loan with a $15 origination fee per $100, and no interest or other charges.
That borrower also would be able to request a 60-day extension at any time.
Another provision is to limit borrowers to $500 at a time, tracked with a statewide database.
That could stop the cyclical debt traps, Widener said.
Also, borrowers could not take out more than two loans in 90 days without taking a state-approved financial education course.
Widener also proposes to make the small-loan lenders subject to the Consumer Sales Practices Act, which regulates practices such as deceptive advertising and the ability to repay.
"There's quite a bit of protection for consumers by utilizing that for the penalty," Widener said.
He will see what lawmakers reactions are early next week to determine how the plan will proceed in the House.
The Coalition for Responsible Lending is in favor of a 36 percent APR cap on the loans, which is proposed in one of the payday lending bills and was endorsed by Gov. Ted Strickland on Friday, April 25.
Widener's proposal falls short in its reforms and the coalition wants to continue dialogue with Widener, spokeswoman Suzanne Gravette Acker said.
"We're concerned that that is not going to address the debt trap as well as it needs to," she said. "The coalition really feels the key element is the rate cap."
Contact this reporter at (937) 328-0363 or ssommer@coxohio.com.
