Payday lending debate continues in Ohio

DAYTON, Ohio -- A leader of the Ohio payday lending industry says a bill co-sponsored by a Springfield lawmaker that would change how the industry is operated in the state is bad for Ohioans and the state's industry.

However, State Rep. Kyle Koehler, R-Springfield, said his bill aims to put more regulation on the industry and will serve to protect Ohioans from what he calls outrageous fees and rates.

Ted Saunders, CEO of the company that owns CheckSmart and president of the Ohio Consumer Lenders Association, told the Dayton Daily News that Koehler's bill, passed by the House Government Accountability and Oversight Committee and expected to go to the House floor for a vote this month, would lead to devastating outcomes for the lending industry and consumers who rely on its services.

"We have more than half the state living paycheck to paycheck, and Springfield specifically is below the average line in Ohio," Saunders said. "The demand for consumer lending is very, very high and I think we can deliver it in a very safe and regulated way."

Koehler said there are too many payday lending stores in Ohio. He said all of them are currently ignoring or finding loopholes in legislation passed in 2008.

"If some of them go away, that is not an issue that I am concerned about," Koehler said. "If they are doing things outside of the law and us reforming the law causes a few of them to close up, what does that say about their business? That's my question."

House Bill 123 calls for closing loopholes, limiting monthly payments to no more than 5 percent of the borrower's monthly income, limiting fees to $20 or no more than 5 percent of the principal, requiring clear disclosures for consumers, limiting loan amounts to no more than $500 and allowing only one loan from any lender at a time.

Saunders said the bill could lead to many jobs being lost and less opportunity for people to borrow needed money to help pay bills and other pressing costs.

There are ways to better protect consumers in Ohio than Koehler's bill, Saunders said.

"There are a handful of operators, many from out of state, many that are not even licensed in Ohio, that have structured some products that our association doesn't like," he said. "We don't think they are consumer fair and friendly and we want to advocate to put some bumpers on the lane on those products."

Koehler said payday lenders should have already implemented the payment plan. He believes the industry is trying to use stall tactics until December, when the bill would die.

"They don't want us to reform payday lending," he said.

There are at least 13 such stores in Springfield and Urbana (Koehler's area), many clustered on East Main and South Limestone streets. Ohio in all has more than 830 storefronts that offer payday or car title loans, most of which offer both forms of loans, according to a report by the Center for Responsible Lending.

Saunders said high rates do exist in the industry and they need to be regulated.

"There are cases, less than 10 percent, but there are cases where people charge some pretty high rates, rates beyond what our trade association thinks is fair and in line with national averages. We're going to advocate to do something about those outliers," he said.

One of the biggest regulations Saunders said he is open to is putting a hard cap on the money owed to lenders, he said.

"We recognize that customers and the situation that they are in are precarious," he said. "If they get to that next paycheck or two paychecks down the road and they can't make it all work, then I want a solution in law for them.

"One of the great criticisms of the industry is that if someone takes a loan and they find themselves unable to pay it back in two or three paychecks, then they would, in turn, go to a different lender to borrow from one to pay off another. I want to stop that by giving people a free extended payment plan."

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What House Bill 123 seeks to do

Close loopholes.

Limit monthly payments to no more than 5 percent of the borrower's monthly income.

Limit fees to $20 or no more than 5 percent of the principal.

Require clear disclosures for consumers.

Limit loan amounts to no more than $500.

Allow only one loan from any lender at a time.

Parker Perry writes for the Dayton Daily News. Email: Parker.Perry(at)coxinc.com.

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