A decade after Ohioans voted by nearly a 2 to 1 margin in favor of capping payday loans at 28 percent APR voters may be asked to decide the same issue again in November.
Payday lenders sidestepped the limits put in place by the 2008 ballot issue by issuing loans under other sections of Ohio law. The result is that borrowers are paying annual interest rates of 591 percent.
Working with faith leaders and consumer advocates, state Rep. Kyle Koehler, R-Springfield, introduced House Bill 123 in March, which calls for capping payday loan rates at 28 percent. But the bill has failed to gain traction.
On Thursday, consumer advocates announced they are preparing to put the issue on the November ballot.
Springfield pastor Carl Ruby, a leading advocate for reform, said in a written statement: “Every day of inaction on this issue costs Ohio residents more than $200,000 in excessive borrowing costs. We have received little more than lip service regarding HB 123. We have tried, and will continue to try, to move this legislation forward, but the lack of progress by state leaders is no longer acceptable.”
Ohioans for Payday Loan Reform are presenting ballot language to Ohio Attorney General Mike DeWine.
Payday lenders have said that government shouldn’t restrict private-sector lending options. Patrick Crowley, spokesman for the Ohio Consumer Lenders Association, said in a written statement: “We remain committed to work with members of the General Assembly and all interested parties on appropriate reforms that do not jeopardize access to credit for the millions of Ohioans we serve. PEW’s continued misrepresentations—assertions that they know to be false—are not helpful to achieving any reform. We will have further comment if and when they file their proposal with the Attorney General.”
Typically with payday loans, consumers borrow $100 to about $1,500 and must pay it back within 30 days, either through a post-dated check or automatic withdrawal. They pay interest and fees that can boost the annual percentage rate above 400 percent. Often, borrowers can’t make the full payment when it comes due, so they extend the loan, accruing more interest and fees.
Ohio law banned payday loans for more than 50 years but in 1995 the Legislature approved the Pay Day Loan Act, which requires state licensing and exempts payday lenders from the state’s usury laws.
By 2008, lawmakers passed bipartisan legislation to curb payday loan rates and cap them at 28 percent APR. The industry put the legislation up for a referendum and 63.6 percent of voters decided to keep the new limits.
But lenders sidestepped the law by getting licenses to operate as credit service organizations, which don’t face fee limits. Those organizations can issue loans under the Ohio Mortgage Lending Act and the Ohio Small Loan Act.