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A man enters a check-cashing store in Detroit in this 2001 file photo. A new study says payday lenders are charging Ohioans more than $180 million in annual lending fees despite a 2008 vote supposedly capping payday lenders' annual interest rate at 28 percent.
(Donna Terek, Detroit News/AP Photo, File, 2001)
In 2008, appalled by the gouging that payday lenders were inflicting on Ohioans, almost 3.4 million Ohio voters decided to cap, at 28 percent, the annual percentage rate that payday lenders could charge the state's borrowers. That should have settled the matter. But it didn't.
Payday lenders (represented today in Columbus by more than 20 Statehouse lobbyists) found a way to ignore that 2008 vote. The 2008 APR limit applied to one then-widely-offered type of payday lending, so-called "check-cashing" lending. But the 28 percent cap didn't apply to two other kinds of lending that loophole-seeking lenders now use: Payday lenders can, and do, still charge Ohioans triple-digit interest rates by operating as second-mortgage lenders or purporting to be so-called credit service organizations. Last year, the Ohio Supreme Court upheld payday lenders' use of the state's second-mortgage loan law to evade the 28 percent APR that voters set.
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A new
by the Center for Responsible Lending demonstrates the damage lenders do in Ohio by defying Ohio voters' will. For instance, the report estimates that fees charged on payday loans cost Ohioans $184 million a year. Strikingly, fees charged on car-title loans cost Ohioans even more - an estimated $318 million a year. And the center cited examples of outrageous interest lenders charge on longer-term Ohio payday and car-title loans: APRs ranged from 127 percent to 496 percent.
Payday loans weren't legal in Ohio until 1995, when they were authorized amid the hurly-burly of that year's state budget debate. The abuses that ensued led to the 28 percent APR proposed in 2007-08 by bipartisan House Bill 545, which voters upheld at the ballot box.
In 2008, Ohioans thought they'd scored a victory for consumers, and, incontestably, those voters spoke loud and clear. But the Center for Responsible Lending's data also speak loud and clear - about subversion of the statewide consensus that Ohioans reached in 2008, subversion unchecked by the legislature.
The General Assembly, in failing to close payday loan loopholes, is all but declaring that 20-odd lobbyists carry more weight in Columbus than 3.4 million Ohio voters. Is that really a message that House Speaker Clifford Rosenberger and Senate President Keith Faber want to send?