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New Legislation Spells out Reforms That Would Make Payday
Lending Fair and Affordable in Ohio
Reps. Koehler and Ashford say sensible changes would save
residents tens of millions of dollars annually and have
strong public support; Ohio groups support efforts and join
growing statewide momentum for reform
Special to The Truth
State lawmakers Kyle Koehler (R-Springfield) and Mike
Ashford (D-Toledo) last week introduced legislation to
reform a payday lending market that charges the highest
rates in the nation, drains money from the state’s economy
and harms Ohio consumers.
The legislation has the support of a growing grassroots
coalition of Ohio consumer, business, veterans and faith
groups. Recently, the Cuyahoga County Mayors & Managers
Association voted to support the reform effort. Northeast
Ohio groups signing onto the effort include the Cuyahoga
County and Lake County Veterans Service Commissions,
Neighborhood Housing Services of Greater Cleveland, the East
Akron Neighborhood Development Corp. and others. Statewide
supporters include the Ohio Job & Family Services Directors
Association, Ohio Council of Churches, Catholic Conference
of Ohio, Ohio Poverty Law Center and Ohio CDC Association.
“Our proposed
reforms would bring stratospheric borrowing costs back down
to earth from their hyper-inflated current levels,” Koehler
said. “These adjustments are long overdue. They will help
our state’s hard-working consumers using a proven model that
will still preserve access to credit in Ohio.”
More than a million Ohioans have taken out high-cost payday
loans. Ohio today has the highest payday loan rates in the
nation—an average annual percentage rate (APR) of 591
percent. A typical Ohioan who has a $300 payday loan out for
five months must pay back more than double the amount ($680)
in interest and fees alone.
The legislation introduced today makes loans affordable by
ensuring monthly payments do not exceed five percent of a
borrower’s gross monthly income. The bill also sets a
maximum on how much payday lenders can charge, limiting the
annual interest rate to 28 percent plus monthly fees of five
percent on the first $400 loaned, or $20 maximum.
Ashford said the legislation will ease financial hardships
on Ohio families. “Unfortunately, many payday lenders are
geared toward taking advantage of households that are living
paycheck-to-paycheck,” Ashford said. “For too many families,
this makes it impossible to pay off the 591 percent loans
and, as a result, Ohioans are living behind the financial
eight ball for a long time. We hope to change that with this
legislation.”
Added Carl Ruby, Senior Pastor, Central Christian Church,
Springfield, and Director for the Ohio Coalition of Faith
Leaders for Lending Reform, “Now is the time for us to end
practices that prey upon the most vulnerable members of our
communities. I, and many other faith leaders from across
Ohio, strongly support this bill because it ends practices
that price-gouge families, trapping them in long cycles of
debt.” Ruby is one of the founders of Ohioans for Payday
Loan Reform, the growing statewide coalition.
Valerie Moffitt, of the Toledo FOC Network, said payday
lending reforms are needed. “More and more families
throughout Lucas County are being trapped in the debt cycle
caused by the unreasonable repayment terms Ohio allows
payday lenders to impose on its citizens,'' she said. "We
need the sensible interest rates and repayment terms to
protect our families. The proposed legislation will help
our families prosper, as opposed to the current payday
lending practices that are designed to drive our families
deeper and deeper into poverty.”
A number of veterans’ service groups have voiced support of
reform efforts, noting that veterans who can’t pay off
payday loans have turned to them for help. “Many of the
veterans we assist at the commission find themselves trapped
into a cycle of borrowing money that has no easy exit and
can be very expensive,” said Jon Reiss, executive director
of the Cuyahoga County Veterans Service Commission. “We are
hopeful that today’s proposed legislation will result in
reasonable lending programs that provide relief to
financially challenged veterans as well as all Ohio
citizens.’’
Grady Appleton, president and CEO of the East Akron
Neighborhood Development Corp, said, “We need to increase
all Ohio residents’ financial independence. That simply
can’t happen for people who are caught in an expensive
payday loan cycle. Let’s provide them a more fair,
transparent product that they can pay off in a reasonable
amount of time.’’
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