COLUMBUS (WCMH) — A 2008 Ohio law that was supposed to license payday lenders and cap interest rates on payday loans failed to live up to its billing.
The payday lending barely missed a beat. The industry simply bypassed the Short Term Loan Act and the businesses started operating as credit service organizations and making loans under the Ohio Small Loan Act.
Springfield area Republican Rep. Kyle Koehler says the 2008 law was a swing and a miss. “Since then, not one payday lender has been licensed under this legislation that was passed in 2008,” Koehler said. “So every payday lender in the state of Ohio is working through a loophole.”
Koehler is co-sponsoring legislation to try to close the loophole. The bill would require the businesses operate under the 2008 law with a few adjustments. It would limit monthly fees to $20 and cap interest rates at 28 percent. Under the bill, borrowers could only be required to pay 5 percent of their income per pay period.
Koehler knows the industry will be opposed to the changes.
“They’re operating without any kind of guidelines, any kind of guardrails at all,” Koehler said. “I understand that they don’t want any guidelines but the truth is we need to protect these folks who are borrowing money who are in a vulnerable situation,” said Koehler.
A check of the websites of several payday lending operations in Ohio found financing charges and fees totaling the equivalent of an Annual Percentage Rate of 316 percent to 728 percent.
A coalition of organizations dedicated to reforming the payday loan industry is holding a rally at the Ohio Statehouse this Wednesday at 1pm.
Rep. Koehler says educating consumers about the problem is part of the solution. He said his proposal is not intended to put anyone out of business but he believes the legislature needs to act.
“It’s not a time to teach someone to swim when their drowning,” Koehler said. “We need to help them and make sure they’re not being thrown a rope tied to an anchor instead of a rope tied to a life raft,” said Koehler
NBC4 has reached out to the Ohio Consumer Lenders Association for comment on the proposed legislation.