Last year, 64 percent of voters approved Issue 5. Not even Franklin D. Roosevelt or Ronald Reagan ever carried Ohio by such a margin. What Issue 5 did, so 3.4 million voters thought, was cap, at 28 percent, the annual percentage rates payday lenders could charge. (In 2006, President George W. Bush, hardly one of Ralph Nader’s raiders, signed legislation capping APRs at 36 percent for members of the armed forces and their dependents.)
But four months after Ohio voters set the 28 percent limit, the Cleveland-based Housing Research & Advocacy Center reported that payday lenders, like mosquitoes adapting to a new bug spray, had evolved. They opted to lend under two other Ohio loan laws, one regulating small loans and a second regulating mortgage lending. That, Housing Research & Advocacy said, let lenders collect APRs of 432 percent (under the small loan law) or 680 percent (under the mortgage loan law).
So on June 4, Rep. Matt Lundy, an Elyria Democrat, introduced a loophole-closer. According to the Coalition on Homelessness and Housing in Ohio, House Bill 209 would “require that all loans lower than $1,000 and for less than 90 days be prohibited from charging more than 28 percent APR (and) prohibit charging a fee to cash the loan check.”
The lenders argue what they’re doing is legal. House Minority Leader William G. Batchelder, a Medina Republican, disagrees. He was a spark plug of then-Rep. Chris Widener’s 28 percent APR cap. (Widener, a Springfield Republican, is now a senator.)
“I think the present law (approved in last November’s election) is being violated,” Batchelder said. He hasn’t co-sponsored Lundy’s bill out of concerns that, as worded, it may fire a shotgun instead of the derringer Batchelder thinks is needed. He also wonders why state regulators haven’t tested the 2008 law by taking alleged violators to court.
Lenders say they told legislators in 2008 that they would indeed substitute mortgage-lending and small-loan borrowing for banned 391 percent APR loans. (But lenders also claimed Widener’s bill would run them out of Ohio altogether.)
Then there’s a “fairness” argument: Payday lenders argue the legislature won’t clamp down on banks’ bounced-check and cash-advance fees (although that’s difficult, because Congress pretty much monopolizes banking law).
Also on the table is the argument that if no Ohioan ever needed a payday loan, the payday lenders would vanish. That rationale says that unless Ohio assures poor Ohioans more credit options, Ohio should let lenders be.
That’s the political landscape. Still, more’s the wonder that a GOP-run Ohio House, in 2008, would move to rein in lenders while, in 2009, a Democrat-run Ohio House hasn’t.
The legislature recently took a mere 25 days to place on the ballot a “farm-animal-treatment” amendment backed by agri-business. It’s been seven weeks since Lundy’s bill surfaced. But the legislature is now home for the summer.
Of course, it hasn’t hurt payday lenders that they’ve signed some of the biggest Statehouse batters to their lobbying lineup; among others, they include Neil S. Clark, who might as well be the 34th senator in Ohio’s 33-member Senate; Dan Jones, an aide to then-Gov. George V. Voinovich; and C. David Paragas, partner in charge of the Columbus office of Cleveland’s Benesch law firm.
They and other Statehouse advocates speak eloquently for their clients — as should Ohio’s 132 legislators, whose clients are the voters.
Thomas Suddes is an adjunct assistant professor at Ohio University. Send e-mail to tsuddes@gmail.com.