Ohio Payday Lending Overhaul Examined As A National Model

M.L. Schultze

Ohio’s overhaul of its payday lending laws will be fully implemented in April. At a conference in Washington Monday, it was applauded as a national model that ensures the short-term loans will continue to be offered without gouging consumers.  

During the discussion organized by the Pew Charitable Trusts, advocates for the overhaul said they battled more than three-dozen lobbyists for the payday lending industry who wanted to maintain the status quo, including interest rates and fees that averaged nearly 600 percent.

Republican David Thomas, the newly elected Ashtabula County auditor, was among those pushing for the changes approved this summer. He said a key tactic was ensuring lawmakers understood how many people are being trapped by the loans.

“We had a farmer who had taken out a loan to help with a piece of equipment. We had a small business owner who does a landscaping business and he had to pay his payroll one or two months out of this loan process,” Thomas said. “So there’s a huge diversity. It’s not what we stereotypically think of.”

Vernon Sykes, Akron’s Democratic state senator, said another factor played a role in passage of the changes. Ten years ago, Ohio voters approved a referendum capping the interest rates and fees on short-term loans. The industry quickly found a loophole by redefining itself and the section of the law under which it could be regulated. But Sykes said the measurement of public sentiment then was telling to lawmakers now.

“In the menu of options that you have available to you in trying to address a policy change, I would include possible ballot initiatives as well,” he recommended to advocates from other states.

He got a qualified agreement from Jay Hottinger, a Republican senator from Newark.

“As long as those ballot initiatives seek balance, seek bipartisanship and don’t try to go too far, because if they go too far and they get defeated, then that’s a message to legislators that our voters have spoken and we don’t need to act on this.”

Hottinger said the payday lending changes required political courage on the part of his fellow lawmakers.

“You have to summon up some courage to be able to go against some interests, to go against some friends, and to go against the grain a little bit and say, ‘What does small R reform really do?” he maintained.

Members of the Ohio House voted the lending bill out of committee not long after Speaker Cliff Rosenberger resigned amid reports of an FBI probe into his travel with payday lending lobbyists. He has denied he did anything wrong.

Mike Caputo of Capitol Partners is a lobbyist who worked with the reform advocates. He told the Pew audience Monday he thought the Rosenberger scandal was largely irrelevant in the bill getting out of the House and over to the Senate. If anything, he maintained, Rosenberger’s leaving may have slowed down the process.

Another advocate, Carl Rudy, said Rosenberger’s fall may have helped a bit by nudging some undecideds to vote for the reforms.

The advocates and lawmakers both maintained that the changes will allow the payday lending industry to continue to make money in Ohio, but will stop the cycle of high-interest and high-fee loans that many people can never pay off. The Pew conference ended with the suggestion that some new types of lenders may come to Ohio when the rules are fully in place.

The changes that began taking effect last month include caps on interest rates and fees at no more than 60 percent of the original loan amount. Advocates said they’ll continue to watch closely to ensure there are no last-minutes attempts to water down the law.