COLUMBUS – Legislation restricting the practice of payday lending was passed in Ohio more than seven years ago, but some policy experts say the industry has yet to be brought under control.
The Ohio Short-Term Loans Act was passed in 2008, but Kalitha Williams, Liaison Officer with Policy Matters Ohio, said the Ohio Supreme Court last year upheld a loophole in the law that allows payday lenders to operate outside the bounds of the law. She says some operations charge interest rates of up to 600%, which creates a cycle of debt.
“With the triple-digit interest rates and the lump-sum payments that are owed, families simply cannot afford to reasonably repay these loans in the short period of time they have,” Williams said. “They end up being stuck and in debt for several months. “
The Consumer Financial Protection Bureau is expected to release an official proposal this fall to better regulate the payday lending industry.
An initial proposal includes regulations on the term of loans, how long a person can be in debt, and how lenders access borrower payments. Ohio is third in the country for the number of consumer complaints about payday loans to CFPB.
The CFPB can’t regulate interest rates, so Williams says state lawmakers should consider overhauling Ohio’s short-term loan law.
“Even with strong federal action, there is still work to be done in the Ohio Legislature to bring interest rates under control,” she said. “Ohio payday loan interest rates are really booming.”
Williams adds that those stuck in a payday loan cycle should file a complaint with the CFBP so that policymakers can get a full picture of the impact of industry practices.
“The industry has talked about providing this great product to the community and it’s a real resource, but we need people to talk about how they are struggling to pay off these loans,” she says.
Payday lenders claim they offer a quick financial fix for those in a bind, but Williams says a payday loan takes a third of the borrower’s paycheck, leaving little to live for.
Legislation restricting the practice of payday loans was passed in Ohio more than seven years ago, but some political experts say the industry has yet to be brought under control.