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House to go back to work on measure
By Dennis Willard
Beacon Journal columnist
Published on Sunday, Apr 27, 2008
COLUMBUS: Gov. Ted Strickland demonstrated executive power exists in Ohio in his battle with House Republicans over electric re-regulation.
Now, less than a week after that controversy appears settled, in large part because Strickland threatened a veto, the two sides appear ready to square off over payday lending.
For months, the Ohio House has been sitting on three bills to regulate the payday-lending industry, which has been accused of trapping people in cycles of debt and charging excessive interest rates.
Strickland, who has been relatively quiet on the issue, stepped front and center Friday by sending a short and succinct letter to the Coalition for Responsible Lending that outlines his position on the bill.
''While there is much debate regarding the various ways to address the payday-lending problem in Ohio, I believe there is one critical feature of any set of proposals aimed at breaking the cycle of debt — an all-inclusive 36 percent APR cap,'' Strickland wrote.
His spokesman, Keith Dailey, said ''all-inclusive'' means a maximum APR, or annual percentage rate, of no more than 36 percent, including fees and other charges associated with the loan.
The 36 percent cap is at the core of legislation sponsored by state representatives William Batchelder, R-Medina, and Bob Hagan, D-Youngstown.
The payday-lending industry has launched a massive lobbying effort to kill the Batchelder-Hagan bill, arguing that a 36 percent cap would shut down the storefront outlets and people with no means to work through a short-term financial crisis would have no place to turn.
House Speaker Jon Husted, R-Kettering, who tangled with Strickland over the energy bill, has indicated he wants the legislature to move on payday lending.
On Wednesday, House Republicans met in caucus on the issue. A day later, it appeared some GOP members were ready to push a bill much more amenable to the payday-lending industry.
State Rep. Chris Widener, R-Springfield, chairman of the Financial Institutions, Real Estate and Securities Committee, said lawmakers believe the coalition has made the case that Ohio's 13-year-old law on payday lending is not working.
Widener said he and other Republicans are proposing a fee system for the loans, in which the payday lender would receive $15 on every $100 borrowed for up to 31 days.
A borrower would be allowed to extend the loan for 60 days and pay no additional fees, penalties, interest or late charges.
Widener said that would mean the APR for a 90-day loan would be 60 percent.
''We believe that if you cap the rate at 36 percent, then the industry will have no option but to shut down,'' he said.
Widener said most lawmakers acknowledge the need for people to borrow relatively small amounts of money on a short-term basis.
According to his proposal, no borrower could take out more than two loans at the same time for more than $500 combined, and the state would establish a database to track the loans that would cost the borrower 45 cents per transaction.
Widener said the state would also license nonprofit corporations, credit unions and banks that might be interested in providing these loans.
The proposal also would place the industry for the first time under the Consumer Sales Protection Act, which means customers would have more protections.
His plan also would eliminate all language in the Ohio Revised Code referring to ''check cash lending,'' and place payday loan operations under the Small Loan Act.
Are there loopholes for the industry in the Widener plan?
The $15 fee per $100 over a two-week period still is a 391 percent APR, but industry officials have always maintained that this is misleading, because the loans are short-term.
Borrowers could not have more than two loans for more than $500 at any one time, but there is nothing stopping them from repaying the loan and taking out a new loan immediately, which is one of the causes of the cycle of debt.
Tom Allio, executive director of the Catholic Commission of Summit County who chairs the coalition, said his organization agrees with the governor that the cap should be 36 percent.
The House is expected to go back to work on the measure, but for the first time, it will do so with a clear understanding of Strickland's position.
Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.
COLUMBUS: Gov. Ted Strickland demonstrated executive power exists in Ohio in his battle with House Republicans over electric re-regulation.
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