COLUMBUS: In a surprise move Tuesday, House Republicans introduced legislation that would cap the annual percentage rate charged on payday loans at 28 percent.

The bill, which is expected to clear a House committee today and possibly hit the floor for a vote, was a sudden reversal in policy on the rate cap and appeared to be an effort to trump Gov. Ted Strickland.

On Friday, Strickland issued a letter to the Coalition for Responsible Lending stating it was critical that any payday lending bill would have an all-inclusive 36 percent rate cap.

State Rep. Chris Widener, R-Springfield, introduced legislation Tuesday that includes the 28 percent annual rate cap, bans any other fees and stops someone from having more than two loans at one time.

The bill also limits the total loan amount to $500, gives borrowers a minimum of 31 days to repay, mandates financial counseling for anyone seeking
a third loan and prohibits anyone from having more than four loans in one year.

Currently, single loans are limited to $800 and are repaid in two weeks. No one is supposed to have more than one loan at a time, but there is no method to police the industry. The Beacon Journal has interviewed individuals with 10 or more loans out at a time.

Widener's bill would create a statewide database maintained by the Ohio Department of Commerce to track loans.

The bill also would provide increased consumer protection by placing the payday industry under the Consumer Sales Practices Act and the Small Loan Act in Ohio, Widener said.

High interest rates

The industry has come under fire in Ohio and other states for charging 391 percent interest rates and trapping borrowers in cycles of debt.

Last week, Widener proposed eliminating the rate cap by allowing the industry to charge fees amounting to $15 per $100 borrowed over a two-week period, but the idea was criticized because the fees still represented a 391 percent APR.

On Tuesday, House Speaker Jon Husted, R-Kettering, pointed to the debt carried by consumers in Ohio and across the country and said the legislature needed to address the problem.

Darryl Dever, a lobbyist for Ohio Financial Service Centers Association, called the new bill the worst version yet.

''If 36 percent will put me out of business, 28 percent will only get me there quicker,'' Dever said, noting that he was ''stunned'' by the turn of events.

''The business is over. People are not going to be able to get loans, fair loans,'' Dever said. ''This bill will do away with that option. Nobody is going to make any short-term loans.''

Dever said the bill will eliminate 6,000 jobs in Ohio.

Tom Allio, executive director of the Coalition for Responsible Lending, said his organization was pleased with Widener's proposal.

''The rate cap, as well as the other provisions in the bill, mean that Ohio can legitimately lay claim to having the strongest small-loan act in the nation,'' Allio said.

Responding to Dever, Allio said the industry's uncompromising approach to regulation has come ''home to roost.''

''Our hope is that this legislation will breeze through the House and sail through the Senate. Ohio will be a stronger state with these consumer protections,'' Allio said.

Governor reviews bill

Keith Dailey, a Strickland spokesman, said the governor is reviewing the legislation and would be comfortable with any rate cap that is 36 percent or lower.

''The governor believes responsible lenders will continue to be able to run successful businesses within the context of the rate cap,'' Dailey said.

He said Strickland is not interested in eliminating the industry in Ohio.

''At the same time, the governor thinks it is important that a rate cap be in place to prevent bad actors in the industry from taking advantage of vulnerable Ohioans,'' Dailey said.

Widener said he included language in the bill to collect more data on the industry and the number of people employed because legislators were bombarded with conflicting statistics during hearings before the House Financial Institutions, Real Estate and Securities Committee he chairs.

The Ohio Department of Commerce has a list of storefronts, but little else is known about the payday lending industry in the state.

Widener's bill would also ban Internet payday lending in Ohio.