the Beacon Journal editorial board
In December, the state legislature appeared ready to make a run at something that should have been accomplished years ago — corral, finally, the usurious payday loan industry. Then, the lead Republican sponsor in the House backed away. Fortunately, state Rep. Kyle Koehler, a Springfield Republican, now has embraced the cause.
Koehler has joined with state Rep. Michael Ashford, a Toledo Democrat, in reviving what long has been a bipartisan effort. Both parties have seen the need, the Pew Charitable Trusts reporting at the end of last year that Ohio has the highest payday lending prices in the country. The study found that a typical payday loan of $300 costs the borrower $680 in fees during five months.
That amounts to an annual interest rate of 591 percent.
The shame is, state lawmakers thought they had addressed the problem effectively enough nine years ago, when fees and interest reached similar punishing levels. They responded by capping the annual payday interest rate at 28 percent, Democrats and Republicans applauding the bill.
When payday lenders fought the measure at the statewide ballot, voters overwhelmingly rejected their case. Then, the payday operators proved the more resourceful. They located another part of state law that has allowed them to remain in business as usual, or taking advantage of Ohioans struggling financially from paycheck to paycheck.
Those Ohioans looking for a bridge, or help making ends meet, too often find themselves in a trap, cycling through a series of payday loans covering months.
As payday lenders maneuvered, Republicans in charge at the Statehouse lost their appetite for countering. Is it telling that since 2010, the payday industry has contributed more than $1.5 million in political money, mostly to the majority party? The lenders essentially operate now as if the reform effort never happened.
Will that change? The legislation proposed by Koehler and Ashford is sufficiently strong. It would set a 28 percent interest rate, plus a monthly fee of 5 percent on the first $400 loaned (a maximum of $20). It would require that payments not exceed 5 percent of the borrower’s gross monthly income.
The door would be shut to reconstituting under other provisions of state law.
So, the mechanism is available for improvement. The wish is that Republican legislative leaders feel embarrassed, Ohio, the picture of exploitation by payday lenders, the dismal episode a thumbing of noses at voters.
Then, there are the positive results in other states, particularly in Colorado, where restrictions on the payday industry, approved in 2010, have served borrowers well. Obtain a loan of $300, and the fees there total $172 during five months, or far less than in Ohio.
More, the payday industry did not disappear. Many lenders did closed shop, but others continue under the tightened rules.
A Pew analyst recently told the Columbus Dispatch that the Koehler-Ashford legislation would save Ohioans an estimated $75 million a year. That sum is partly what Ohio voters had in mind when they sided so decisively with reform. A Pew survey, released this week, shows that 78 percent of Ohioans favor more regulation of payday lenders, with the same share supporting something close to what Koehler and Ashford seek.
That makes more powerful the case for lawmakers to act.