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Major changes to payday lending step closer to coming to Ohio

The Ohio House voted 69-14 for a controversial bill that calls for a major crackdown on the payday lending industry.

“The time for reform is now,” said state Rep. Kyle Koehler, R-Springfield, who introduced the bill in March 2017. The bill now goes to the Ohio Senate where lawmakers are already working on the issue.

House Bill 123 calls for closing loopholes and:

* limiting monthly payments to no more than 5 percent of the borrower’s gross monthly income,

* limiting fees to $20 per month or no more than 5 percent of the principal up to $400,

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* requiring clear disclosures for consumers and

* caps on fees and interest at 50 percent of the original loan amount. The bill applies to payday and auto-title loans.

Ohio has 650 lenders and roughly one in 10 Ohioans take out payday loans, Koehler said.

State Rep. Bill Seitz, R-Cincinnati, opposed the bill, saying customers are happy with the industry and the reforms are being driven by newspaper editorial writers, non-profits and out-of-state charitable trusts, which he collectively described as “national nanny state politics.” He said the bill doesn’t address the root problem: financial literacy.

Related: Payday lender made 3 international trips with Rosenberger

State Rep. Michael Ashford, D-Toledo, a co-sponsor, said financial education isn’t the fix. “The bottomline is: they’re still poor people.”

As the legislation heads to the Senate, Koehler said he is open to reasonable compromises but not stall tactics, adding that he is confident the bill will become law by the end of 2018.

The bill has been the subject of intense lobbying and political manuevering for more than a year. The lenders, represented by a small army of well-connected lobbyists, opposes the bill, calling it unworkable and an industry killer. Consumer advocates, including The Pew Charitable Trusts and the Rev. Carl Ruby of Springfield, insist that the caps on fees and interest rates are necessary protections for borrowers.

Related: Big money, political clout on display in payday lending fight

Typically with payday loans, consumers borrow between $100 and $1,500 that must be repaid within 30 days, either through a post-dated check or automatic withdrawal. Interest and fees can boost the annual percentage rate above 400 percent. Often, borrowers can’t make the full payment when it comes due, so the loan is extended, accruing more interest and fees.

Former Ohio House speaker Cliff Rosenberger resigned April 12 amid an FBI investigation into his international travels with payday lending industry lobbyists. Rosenberger has said that all his actions have been legal and ethical.

Federal Bureau of Investigation agents raided Rosenberger’s Clarksville home and a storage unit in Wilmington on May 23.

Debate on the bill included some interesting predictions. Seitz said the restrictions may force borrowers to use loan sharks, who he called “Louie the Leg Breaker types.” State Rep. George Lang, R-West Chester, warned that if payday loan stores shut down they may be replaced with crack dealers and “Asian massage parlors.”

Miami Valley lawmakers opposing the bill included Republicans Niraj Antani, John Becker, Jim Butler, Tom Brinkman, and Lang. Those supporting it included Democrat Fred Strahorn and Republicans Koehler, Keith Faber, Mike Henne, Scott Lipps, Rick Perales and Jeff Rezabek. More than a dozen lawmakers were absent.

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