Payday Loan Reform Bill Gets Second House Hearing | Local News
COLUMBUS – Ohio House lawmakers heard hours of testimony this week on a bill to limit interest rates and astronomical fees on short-term loans, sparking debate over whether “payday” lenders provide necessary advances to underserved consumers or create “debt traps”.
Austinburg Finance Officer David Thomas, a member of the Ohioans for Payday Loan Reform Coalition, which formed in support of Ohio House Bill 123, is one of the supporters of the law Project. He testified before the House Government’s Accountability and Oversight Committee on Wednesday, during the bill’s second hearing.
Citing research by the non-governmental organization Pew Charitable Trusts, Thomas told the Star Beacon in September that Ohio’s average payday loan interest rates are the highest in the country – nearly 600%. And he said the community is “suffering” because of it.
“I’m here for the farmer, store clerk and machine operator in my community who told me they were too ashamed to speak in public but wanted me to know something needs to change,” a Thomas told the committee.
“They are all educated but going through hard times and in need of short-term help, not knowing that each of their loans would last more than two years with thousands (of dollars) in fees and interest later. “
HB 123 amends the 2008 Short-Term Loans Act, which capped interest rates at 28%, but also contained a loophole that allowed lenders to continue charging the fees they want. The bill also prohibits borrowers from taking out a second loan to repay a previous one, thus creating a cycle of indebtedness, or taking out more than two loans in less than three months.
If that passes, Ohioans are expected to save $ 75 million in “excessive fees,” and Ashtabula residents just over $ 1 million – money that can be “used to support small businesses and support our local schools instead of being sent out of the county, ”Thomas said.
In 2010, the state of Colorado enacted its own set of consumer-focused short-term lending regulations, which the Ohio bill is modeled on, Thomas said.
According to testimony submitted by Thomas, Cynthia Coffman, outgoing Colorado Republican attorney general, wrote a letter to Ohio Governor Richard Cordray, then director of the Federal Bureau of Consumer Financial Protection, in 2015 urging him to reconsider state adaptation regulations.
“Indeed, we consider it a success for the consumer, for the state as a regulator and also for the industry,” she wrote. “Industry abuses (as measured by enforcement measures) are on the decline; consumer complaints are on the decline; and the industry itself is profitable and able to responsibly deliver its products to consumers who choose to enter this market.
But nearly half of the state’s short-term lending institutions closed after the bill was passed, with no new openings since, according to HB 123 opponent Cheney Pruett, founder and CEO of CashMax Ohio, who operates a facility along East Prospect Road in Ashtabula. Thus, access to short-term credit “fell,” she told the committee on Wednesday.
Pruett called HB 123 “a misunderstood bill that attempts to bury the truth under an avalanche of deception. … An avalanche triggered by a special interest group masquerading as a research institute known as Pew.
She tore up the trust’s research on payday lenders and loan transactions and the data they provided to campaigners, lawmakers and the media – which indicated Ohio has short-term loan fees the highest in the country – calling them “intentionally misleading” and “completely misleading.” “
In its own analysis of loans from 2010 to 2014, CashMax indicates that the fees are “less than half” of those cited by Pew. Pruett said Ohio average rates are “well below” the national average, and Pew presented the “worst-case” scenarios as a typical transaction.
She cited a study that found that more than three-quarters of Americans live paycheck to paycheck, making short-term credit an “inevitable reality” for more than one million Ohioans in the service of. industry.
“Nothing in HB 123 gives these Ohioans more credit options. What it does is eliminate one of the only legal and regulated options they have. “
Pastor Aaron Phillips of the Cleveland Clergy Coalition agrees. He cited a recent study indicating that the Clevelanders earn an average of $ 34,000 a year, adding that even a $ 500 emergency could turn into a huge roadblock. HB 123 would shrink the short-term credit market to where it is most needed, he said.
“There is a real need in African American and urban communities for more legal credit opportunities for working families,” he said. “In my experience, most of the banks don’t serve us and the banks don’t give small loans to people who need them.
“Do I like that payday lenders are the only ones in our community today? Of course not. I want there to be competition. I want banks and credit unions to take root in our community and make loans. I want them to compete for our business. This is what is wrong with HB 123.
However, Danielle Sydnor, former financial adviser and current chair of the Cleveland NAACP Economic Development Committee, said HB 123 was proposing “just and reasonable reforms” and would not limit access to short-term credit as suggested. opponents.
“Payday loans as they currently exist in Ohio are destroying assets and setting Ohioians back,” she said. “I’ve seen documents on these loans in Ohio with interest rates as high as 729%. It is unacceptable and it is much more than necessary to keep the credit available.
“While African Americans are disproportionately affected by payday loans, this problem affects all communities. African Americans are twice as likely as others to have used a payday loan, but represent less than a quarter of all payday borrowers, ”Syndor continued, citing national studies which found that most of borrowers are white.
On the same day the committee heard testimony, the Bureau of Consumer Financial Protection announced it would reconsider
rules enacted towards the end of Cordray’s tenure as office manager that assess borrowers’ ability to repay payday loans in full within 30 days and limit the number of loans that can be taken out in a certain period of time, according to the Associated Press.
The rules were due to come into effect gradually in August next year, a process that is said to have started on Tuesday.
“Truly shameful action by the acting pseudo-leaders of the CFPB, announcing their intention to reconsider the payday loan rule which was just adopted in November,” Cordray tweeted Wednesday. “Never mind the thousands of people stuck in the debt trap across the country. May consumers be damned! “