When will Ohio stop the ripoff of payday loans?

The payday lending sharks bought themselves more time.

Ohio senators went home for the summer without doing anything to stop them from ripping off people. Specifically, they didn’t vote on good controls the House has approved.

Here’s the deal: A few senators are thick with the industry and are standing in the way of what the overwhelming majority of Ohioans and most lawmakers want. Oddly, Ohio Senate President Bill Harris, a critic of the industry, is letting them have their way.

While he’s appeasing payday operators, yet another critical report on the businesses is out. The information in the National Consumer Law Center’s “Stopping the Payday Loan Trap” isn’t new. It’s one more compelling recitation of data explaining how people are sucked into borrowing money at sinful interest rates.

In 2008, Ohio’s Republican-controlled legislature passed a law putting strict interest rate caps on payday businesses; lawmakers had become convinced of the damage the outfits do.

Then the payday industry tried to undo that decision by passing a referendum. Voters endorsed the caps.

We’re still talking about the issue today, however, because the payday people are beating the law. Some are operating as “credit service organizations,” which are supposed to counsel people how to get out of debt. The advice payday people give: take out a payday loan.

On paper, the businesses have lowered their rates, but they’re still raking it in by charging customers fat fees — including to cash checks the payday stores have written to customers.

Do they think they’re going to bounce?

There is unquestionably a market for short-term loans. People living paycheck to paycheck will run short sometimes. It’s costly to pay your rent late.

But the payday industry is built around getting people to take out loan after loan, each of which has high fees and/or interest rates. People can end up paying effective rates of 400 percent on an annualized basis.

State Sen. Jon Husted, R-Kettering, voted for a 28 percent cap when he was in the Ohio House. Sen. Fred Strahorn, D-Dayton, voted against that legislation. Now in the Senate, Sen. Strahorn is not budging. His position is indefensible.

Meanwhile, banks are jumping into this business, too. Fifth Third, Wells Fargo and U.S. Bank are all offering short-term loans that, though not as pricey as traditional payday loans, are still shamefully costly.

Fifth Third, for example, charges $1 per $10 borrowed, for an APR of 120 percent. When you sign up, you agree to pay back the loan with your next big automatic deposit, typically your paycheck.

In other words, there’s little risk the bank will lose any money. Moreover, the publicized APR is generously calculated on the assumption that you borrow the money for the longest possible period. If, however, you borrow it right before pay day, your real rate spikes.

The National Consumer Law Center is especially critical of banks’ ability to get customers to effectively sign over their paychecks. It says that’s subverting debt-collection laws.

The maximum amount of disposable income a debt collector can garnishee from your wages is 25 percent. (The theory is that people have to eat and keep up with other bills.) Yet, banks are potentially taking much more.

Fifth Third literature discourages people from habitually taking the loans and a spokeswoman said the “service” is only for its banking customers, that the company doesn’t market the product widely.

Consumers who tap credit they can’t really afford are responsible for their own problems. But there is a public interest in not allowing them to abuse themselves — or be abused — easily. When that happens, society ends up paying.

Whether the borrowers go bankrupt or need public assistance or stop feeding their children, the rest of us pay for their recklessness.

The idea that government would allow businesses to do that is destructive public policy.

— Cox News Service