Reining in the Loan Sharks: In Ohio, a Victory over Predatory Lending

By Allio, Tom | Sojourners Magazine, August 2008 | Go to article overview
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Reining in the Loan Sharks: In Ohio, a Victory over Predatory Lending


Allio, Tom, Sojourners Magazine


Until June, payday lenders in Ohio were free to pursue their predatory business model: They made two-week loans, ranging from $100 to $800, that trapped borrowers into a revolving series of loans from which they had little chance of escaping.

In testimony to the Ohio general assembly, victim after victim stated that a typical initial loan of $300 ending up resulting in thousands of dollars in fees and interest. Ohio was second only to Texas as the largest market for the industry; some 328,000 Ohioans were trapped each year, with an average of 12 loans per customer. Payday lending stores took in more than $2 billion each year in the state.

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But in June 'all that changed, and Ohio consumers celebrated a major public policy victory, when Gov. Ted Strickland signed HB 545 into law. The bill was the culmination of three years of fireless advocacy by the 246-member Ohio Coalition for Responsible Lending (OCRL). The coalition is comprised of faith-based groups, consumer and housing advocates, community action agencies, labor unions, and health and human service providers.

Ohio now has one of the toughest laws against predatory payday lending in the country. The law caps interest rates for small loans at 28 percent, down from the astronomical 391 percent that lenders were previously able to charge. In addition, a person cannot borrow more than $500. Loan terms must be at least 31 days, as opposed to the two weeks previously permitted, and a borrower is limited to four payday loans per year. The bill also bans Internet lending. As Strickland put it, "We will not tolerate individuals being exposed to exorbitant rates."

Getting this law was an uphill battle for advocates. During May, the state house was swarming with lobbyists for the industry. Senate testimony featured CEOs from major national payday lending corporations, and their employees packed heating rooms.

A TURNING POINT in the campaign came when the Cleveland Plain Dealer disclosed that Otto Beatty, the husband of Ohio's House Minority Leader Joyce Beatty, was registered in Virginia as a lobbyist for CheckSmart, an Ohio-based payday lender.

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