Northmont vs. St. Ignatius
Carlisle vs. Brookville
Beavercreek vs. Carroll
Legislators look to cap annual interest rates on payday loans
Supporters say the rate is misleading, and that lenders would not be able to stay open with lower rates.
Friday, June 08, 2007
COLUMBUS — Payday loans, which carry effective annual interest rates of 391 percent, are coming under scrutiny from legislators and Gov. Ted Strickland.
State Rep. William Batchelder, R-Medina, said on Thursday that he is drafting legislation to impose lower interest rate caps on payday lenders, but declined to say what that final cap would be.
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"This is not a problem in the inner city. This is not a problem in the rural areas. This is a general problem," Batchelder said.
Critics say payday loans contribute to bankruptcies and foreclosures, but supporters say they provide a valuable service to Ohioans who need to pay their bills without bouncing a check.
Industry supporters say the high interest rate is misleading because most of the loans are short term and the costs are less than a consumer would have to pay for bouncing a check or missing a bill payment.
Supporters are pushing for a cap of a 36 percent annual interest rate, the rate in federal legislation regulating payday loans to members of the military.
Darryl Dever, lobbyist for the Ohio Finance Service Centers Association, said that at 36 percent rate the lenders would make only a few dollars on each loan.
"You couldn't keep the doors to your business open," Dever said.
The number of payday loan outlets in Ohio has grown from 107 in 1996 to 1,562 last year, more than the number of McDonald's, Burger King and Wendy's restaurants combined in Ohio, according to a report issued this year by Policy Matters Ohio, a Cleveland-based research group. There were 83 payday lenders in Montgomery County, the fourth highest in the state, according to the report.
Tom Allio, chairman of the Ohio Coalition for Responsible Lending, said more than 368,000 of the loans are made annually.
Batchelder, who met Wednesday with a bipartisan group of more than 30 lawmakers and other interested parties to discuss the issue, said he didn't know for sure when he would introduce the bill.
Meanwhile, Strickland is "exploring ways to limit the ability of payday lenders to prey upon the poorest Ohioans," said Keith Dailey, the governor's spokesman.
Maximum amount: $800
Average loan amount: $300
Maximum term: Six months
Average term: Two weeks
Fees: $5 for every $50 borrowed up to $500; $3.75 for every $50 borrowed between $500 and $800
Interest rate: 5 percent per month or partial month on unpaid principal
Effective APR on average loan: 391 percent
Source: Ohio Revised Code and other sources
