Update on Ohio

A bill that consumer advocates say would become a national model for payday-lending regulation passed a divided Ohio House yesterday, despite industry warnings that it would drive their 1,600 stores out of business.

The measure wasn't approved without some political games by House Republicans, who put a major scare into bill supporters when they added -- and later removed -- an amendment banning the Ohio Lottery from adding Keno to its betting options, as proposed by Gov. Ted Strickland.

After months of debate over bills that were backed by either the payday industry or consumer advocates, the proposal that passed the House 69-26 is a victory for the Ohio Coalition for Responsible Lending, which pushed to lower the current 391 percent annual interest rate on two-week payday loans.

The group got a bill even more restrictive than it requested. It sought a maximum 36 percent interest rate and got 28 percent. The coalition wanted to limit borrowers to six loans per year, but the bill imposes a four-loan limit.

"It sends a really strong bipartisan message that we want to first be about protecting consumers in Ohio," said Bill Faith, a leader of the coalition.

Meanwhile, the payday industry, which was talking optimistically a few weeks ago that lawmakers were not supportive of an interest rate cap, got steamrolled.

"What have you accomplished here? You've eliminated a product that people need, and you've eliminated jobs," Daryl K. Dever, chief lobbyist for the payday industry in Ohio, told the House Financial Institutions Committee before it OK'd the measure yesterday morning.

Dever stressed that the bill, which moves to the Senate, would quickly close Ohio's payday stores and put 6,000 people out of work, because no one could make money under the proposed cap.

Jim Tucker of Worthington, who owns six First National Cash Advance stores, urged lawmakers to pass a more moderate alternative that lets him stay in business.

"We don't have to take a sledgehammer approach the very first time," he said.

Support increased for an interest-rate cap as more lawmakers, including Speaker Jon Husted and Financial Institutions Committee Chairman Christopher R. Widener, became convinced that the two-week loan model trapped borrowers in a debt spiral.

Five Democrats and 21 Republicans -- none from Franklin County -- voted against the bill.

"What we have done now is made it an all-or-nothing situation," said Rep. Clifford Hite, R-Findlay. "We voted to put 6,000 people out of a job, and I don't think that's what we're here for."

But Widener, R-Springfield, said that with the average payday customer taking out roughly 12 loans per year, the current system isn't working.

"I've heard a lot of you say you don't want to deal with this, don't want to vote on this, think it's OK what we're doing right now," he told his colleagues. "As legislators, sometimes we got to step up and we've got to do something."

House Minority Leader Joyce Beatty, a Columbus Democrat who in the past questioned the need for an interest-rate cap and whose husband is a lobbyist for a payday lender, voted for the bill.

For a short time yesterday, some feared the bill was in trouble. House Republicans approved by a 49-46 vote the amendment banning the Ohio Lottery Commission from adding Keno, which features numbers drawn every few minutes and displayed on monitors in bars and restaurants. Democrats, livid over the move, called it a "poison pill."

After a 20-minute recess so that lawmakers could meet privately, the amendment was pulled from the bill. The maneuver was meant as message to Strickland, who last week said he supported a 36 percent interest rate cap on payday lenders.

Some anti-gambling House Republicans felt his stance against payday lending and his support of Keno were contradictory, because both would hurt the poor, Husted said.

Husted didn't want to jeopardize passage of the bill, so he let members give their anti-gambling speeches, and then had the amendment pulled.

"We had a lot of members who disagreed with my position on this (payday) bill," Husted said. "I wanted to give them the opportunity to air their thoughts on this bill thoroughly and fully."

jsiegel (@) dispatch.com

Payday-lending regulations
Highlights of House Bill 545, which passed the Ohio House yesterday and now moves to the Senate:

• The annual interest rate would be capped at 28 percent (down from current 391 percent). Additional fees would be prohibited.

• A person could not borrow more than $500, or 25 percent of the customer's base monthly income. The current rate is $800, with no income check.

• Loan terms would have to run at least 31 days. Current loans are usually two weeks.

• A borrower would be allowed four payday loans per year. There's no current loan limit.

• Internet payday lending would be banned, and illegal out-of-state lenders would have no access to Ohio small-claims courts.

• A borrower who wants a third payday loan in 90 days would be required to attend a financial-literacy program.

• Any for-profit, nonprofit or chartered financial institution could get a license to offer short-term loans.

• Violators would be subject to penalties contained in the Consumer Sales Practices Act.

Wow, IPDL's will be illegal if this passess.

source: dispatchpolitics.com/live/content/local_news/stories/2008/05/01/payday01.ART_ART_05-01-08_B1_TQA32FU.html?adsec=politics&sid=101