Payday Lending May Be on Its Way Out in Ohio by Next September
COLUMBUS, Ohio -- Barring legal challenges, payday lending will come to an end in Ohio in September of this year.
The state legislature has finished work on a bill which would cap interest rates at 28% and is ready to send it to the governor, according to organizations on both sides of the controversial short-term loans.
Opponents of the loans celebrated the pending cap and the payday lending industry decried it, with state industry leaders saying they will not be able to remain in Ohio under the cap. The state payday lending trade group, the Ohio Association of Financial Service Centers said that 2,000 people marched to the state capitol building on May 6 to support the loans.
But the Center for Responsible Lending, a subsidiary of the $304 million Self Help Credit Union and a leading payday lending opponent, celebrated the bill moving out of the state legislature, estimating that consumers would save $210 million per year in payday lending fees.
Should the governor sign the bill, Ohio will become 15th state to have passed a double digit cap on short-term loans which effectively ended the practice of payday lending in the state, according to the CRL.
"No business, not a credit union, not a bank, not even a nonprofit can lend money for less than 10 cents a day," Jamie Frauenberg, president of the OAFSC and executive vice president of Ohio-based Checksmart told supporters on May 6. "I am telling you today that my company would no longer be able to operate in Ohio. My employees would be let go and our doors would be shuttered. My customers would be forced to use alternatives they previously tried to avoid."
Referencing the GoodMoney payday loan product offered by the Goodwill, a non-profit, tax-exempt charity, Frauenberg said the $9.90 per $100 fee they charge to break-even equates to a 252% APR. Said Frauenberg, "Even the Goodwill could not offer payday loans in Ohio under a 28% APR cap."
But there are questions about whether the cap will become law on schedule, 90 days after the governor signs the legislation. A spokesman for the OAFSC said that a coalition of payday lending firms whose members have not yet been identified had hired a law firm "to review the constitutionality of the law."