Ohio State Senator Calls for Payday Loans to be Scaled Back
By J.J. CameronPayday Loan Writer
In what is almost becoming a pattern, another legislature has called for a regulation on the payday loan industry in his state. In this case, a bill sponsored by Democratic Sen. Ray Miller of Ohio calls for a lower interest rate, lower fees, a shorter loan term and a ban on payday loans used toto pay off other loans. It also would require the state to create a database to monitor payday loan activity statewide.
“The real financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers,” Miller said in a statement. “The key then is to establish barriers to user dependency.”
Ohio, with 1,383 payday loan stores, is third in the county in number of stores, after California and Tennessee. About 15 states have banned payday lenders or imposed interest-rate caps that ward them off.
In Ohio, payday lenders can loan up to $800 for terms of up to six months. Interest is capped at 5 percent per month on the principal amount borrowed on a faxless payday loan, and loan origination fees are capped at $5 for every $50 loaned. State law forbids payday lenders from making loans to pay off an existing loan from that company.
Miller’s bill would amend the law in these ways:
- Lower the maximum interest rate to 3 percent per month.
- Lower the maximum loan fee to 3 percent of the amount borrowed.
- Shorten the maximum loan term from six months to 31 days.
- Forbid the making of a payday loan to anyone who has an unpaid payday loan.
- Raise the annual license fee charged each payday loan location to $1,000 from a maximum $500.
- Establish a database, to be maintained by the Ohio Division of Financial Institutions, that would help payday lenders determine whether applicants still owe money from previous payday loans.
John Rabenold, spokesman for the second-largest payday lender in the nation, Mason-based Check ‘n Go, said the company opposes the bill. He said Check ‘n Go has 55 stores in Ohio.
“I think the industry recognizes that to be a very problematic bill - for companies and for customers,” he said. “(The lower) rates, for instance, are designed to put the industry out of business.”
Check ‘n Go, he said, charges $15 for a one-month $100 loan - a $10 origination fee and 5 percent interest. Miller’s bill would cut the company’s take on that loan to $6.
State Rep. Tom Raga, who represents Check ‘n Go’s home district, said he had not seen the bill and could not comment on it. He said payday loans have a place in the financial services landscape.
“It certainly fills a credit niche,” said Raga, R-Mason. “From my standpoint, there is a segment of the public that they’re able to serve through these loans. It’s a short-term credit.”
