Fed up with slow-moving solutions in Columbus and deregulation in Washington, D.C., consumer advocates will ask voters this fall to tighten payday lending regulations, providing relief to low-income Ohioans trapped in high-interest, short-term borrowing cycles.

Ohioans for Payday Loan Reform launched a ballot initiative Thursday, a decade after a similar proposal passed but fell short of capping Ohio’s record-high interest rates.

In 2008 by a margin of 2-1, Ohioans approved a 28 percent interest rate cap on payday loans. Short-term lending operations closed, briefly, then exploited a loophole in the law that allowed them to reopen and continue to rates that exceed 700 percent on top of penalties and ongoing monthly fees, such as an extra charge for paying with a personal check.

The Pew Charitable Trust, a civic research and engagement group, found in 2014 that the typical interest rate for payday lending in Ohio is 591 percent — the highest in America. A 2016 review found that two-thirds of payday lending shops in Ohio are run by out-of-state companies.

State plan

In March 2017, Rep. J. Kyle Koehler, R-Springfield, and Rep. Michael Ashford, D-Toledo, introduced a bipartisan plan to limit these fees and interest rates. The bill sat idle until November, when the sponsors were granted time to pitch their plan.

Last week in a second hearing, 19 people lined up before a House committee — 16 in favor and three opposing the reforms.

The Rev. Aaron Phillips of the Cleveland Clergy Coalition said the new rules would chase payday lenders out of Ohio, giving low-income residents nowhere to turn for emergency cash assistance. “Not everyone has a family to turn to in a financial emergency, and families often can’t help much,” Phillips testified.

“This would put at risk access to credit for millions of Ohioans and also have a negative impact on Ohio’s economy,” Keith Lake, a lobbyist for the Ohio Chamber of Commerce, argued. Lake said the industry’s riskier loans to low-income Ohioans, many with poor credit, default 20 percent of the time. HB 123 would prevent payday lenders from charging enough to cover that lost revenue.

And Cheney Pruett — founder and CEO of payday lender CashMax-Ohio — said tighter regulation would “undermine the principle of free-market enterprise under the guise of consumer protection.”

Favorable testimony

Supporting the cap of $20 on monthly fees and 28 percent on interest rates were 16 Ohioans representing various groups, including the Cleveland NAACP, Catholic Conference of Ohio — and the chamber of commerce and a pastor from Koehler’s hometown between Columbus and Dayton.

Carl F. Hughes — chairman, president and CEO of a community bank in Marion — endorsed provisions in HB 123 requiring that “all small loans have affordable payments, no hidden or up-front fees, reasonable time to repay, clear disclosures, and sensible limits on price that ensure that credit is able to flow to consumers.”

He pushed state lawmakers to let credit unions and banks compete with payday lenders, providing more options that might benefit consumers.

The Rev. Carl Ruby brought photos of Springfield-area payday lending locations, often set up in old fast-food restaurants in poor neighborhoods. With more lenders than McDonald’s restaurants, he asked the House committee to consider borrowing $24 for a $5.99 Big Mac.

“I want to tell you about a scare tactic lenders are using to trick people into opposing this bill. They will argue that this bill will hurt people by closing down all of their stores and removing access to emergency credit for working-class people,” Ruby said. “That is … ‘a bald-faced lie.’ ”

Campaign launch

Ruby and others, unhappy with the progress of HB 123, thanked the bill’s sponsors as they announced Thursday a signature drive for a November ballot issue instead.

Ohioans for Payday Loan Reform, as the coalition is called, intends to submit proposed ballot language to the Ohio attorney general, who will review the “constitutional short-term loan consumer protection amendment.”

The group asks anyone interested in volunteering to help with the effort to contact Nancy Lesic at 216-696-7686.

Payday lending reform could be the third major issue before voters this fall as Ohioans voice disapproval of stalled or ignored legislation in Columbus.

Fair Districts = Fair Elections is wrapping up a signature drive to take the decennial process of redrawing congressional voting maps away from state lawmakers. And Akron Organizing Collaborative — along with the Ohio Organizing Collaborative — is hosting and training volunteers Saturday from 11 a.m. to 3 p.m. at St. John CME Church, 1233 S. Hawkins St., for a criminal justice reform campaign. Call Jennifer Toles at 234-200-6512 for more on that.

Trump weighs rules

There’s also national movement on payday lending reform as the current White House unwinds regulations backed by the previous administration designed to protect consumers.

The former head of the Consumer Financial Protection Bureau, Richard Cordray, announced restrictions on payday lenders in October. The new rules, among other goals, would require short-term lenders to determine if borrowers can repay loans. President Barack Obama appointed Cordray to the consumer protection agency, which was created in the aftermath of the financial crisis to impose guardrails against risky financial practices and fraud. Cordray, a Democrat, has since stepped down to run for Ohio governor.

The Community Financial Services Association of America threatened to sue the CFPB’s new regulations on payday lending. Earlier this month, Mick Mulvaney — President Donald Trump’s budget director and new CFPB director — said in a statement that “the Bureau intends to engage in a rule-making process so that the Bureau may reconsider the Payday Rule.”

“We welcomed the CFPB’s decision to take a fresh look at its small-dollar loan rule,” Dennis Shaul, CEO of CFSA, said in a statement emailed Thursday evening. “The Bureau’s rule was crafted on a pre-determined, partisan agenda that failed to demonstrate consumer harm, disregarded the input from millions of customers, ignored unbiased research and data, and relied on flawed information to support its rulemaking.”

This story has been updated to include a comment from the Community Financial Services Association of America received after press time.

Reach Doug Livingston at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow him @ABJDoug on Twitter or www.facebook.com/doug.livingston.92 on Facebook.