More payday-lending ammo readied-OHIO

Ohio legislators making effort to close loopholes they left open with last law

Sunday, May 31, 2009 3:31 AM
By Jim Siegel

THE COLUMBUS DISPATCH
The latest legislative effort to force payday lenders to adhere to a 28 percent interest-rate cap should be rolled out this week.

More than 600 payday-lending stores have closed since lawmakers voted to end the business model that allowed them to charge the equivalent of a 391 percent annual interest rate on a two-week loan. Instead, lawmakers tried to limit the rate to 28 percent.

More than 900 payday-lending stores remain in Ohio, and some lawmakers and consumer advocates say the stores are skirting the intent of the new law by using alternative licenses to continue charging fees that bring them close to the 391 percent interest rate.

Rep. Matt Lundy expects to introduce a bill this week that would cap interest at 28 percent for all loans of up to $1,000 made for a term of three months or less, regardless of what license the lender is using.

Lundy, a Democrat from Elyria, is calling it the Issue 5 Enforcement Act, named after the ballot issue that payday lenders pushed in November to try to overturn the new law. Voters upheld the law by an overwhelming majority.

The payday issue continues to linger because, though the legislature created a lending license with a 28 percent cap, the rate was more restrictive than on other licenses already in law. That all but guaranteed that no payday lender would use the new license; they switched to other licenses that allow for origination fees.

Some lenders also turned out to be more creative than lawmakers expected, issuing checks instead of cash and then charging fees to cash those checks.

Payday lenders say they are simply operating under different licenses, as lawmakers said they should, offering credit to those with few other options.

"We believe a consumer's access to credit in today's environment is extremely important," said Jamie Fulmer, spokesman for Advance America, which operates about 240 stores in Ohio. "Unfortunately, it's clear the objective is to see that the branch lenders are shut down in Ohio."

Yes, "a consumer's access to credit in today's environment is extremely important;" however, when we're talking the equivalent of an interest rate of 391 percent, how can ANYONE (except PDL's, of course) possibly support how the PDL's are operating?

It should be noted that in Ohio, storefront PDLs are not illegal but highly regulated whereas out-of-state internet PDLs are illegal.