DaytonDailyNews.com

COLUMBUS — With a bipartisan posse of legislators looking on, Gov. Ted Strickland signed legislation aimed at ending the so-called "debt trap" caused by short-term payday loans.

"This is but the latest of one of the bipartisan efforts that we are able to celebrate together here in Ohio," Democrat Strickland said on Monday, June 2, before signing House Bill 545 at the Statehouse.

The law, sponsored by Rep. Chris Widener, R-Springfield, sets a 28 percent annual interest rate cap on short-term loans and limits a borrower to four such loans a year. The loans can be for no less than 31 days. The law takes effect in 90 days.

Currently, fees for payday loans are usually $15 for every $100 borrowed for two weeks, which calculates to an annual percentage rate of 391 percent. Taking out a series of such loans trapped borrowers who often weren't able to repay them, supporters of the new law said.

Widener said he was excited to see the bill signed by the governor.

The legislation had bipartisan support, he said.

"We believe it's the most stringent law with regards to payday lending in the country," Widener said.

He also pointed out that if the original law allowing payday lending in the 1990s had included standards for underwriting and the ability to repay, this new legislation likely wouldn't have been needed.

"(Without that), it led to a perfect scenario for people to get caught in a debt cycle," Widener said.

Industry spokesmen have said payday lenders won't be able to make enough to stay in business and that the law will wipe out 6,000 jobs.

"This action has basically disintegrated the industry," said Darryl Dever, an industry lobbyist. "People are shutting down, laying people off."

Supporters of the law said that credit unions, faith-based organizations and others would step in to provide short-term loans.

"We're thrilled beyond words," said Tom Allio, chairman of the Ohio Coalition for Responsible Lending, a group that pushed for the legislation.

Staff writer Samantha Sommer contributed to this story.

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