As reports about the payday lending industry have been linked to an FBI investigation and the resignation of the Ohio House speaker, Republicans on Wednesday stopped short of accepting regulations that, supporters say, would help desperate borrowers avoid a cycle of debt.
Heading into the House Government Oversight Committee hearing, the expectation was that the committee would at least accept a major overhaul of House Bill 123, a payday regulation proposal. The bill, both as written and with the proposed amendment, is strongly opposed by the politically powerful payday industry.
After weeks of concern among payday lending critics that House Republican leadership planned to water down the bill, which seeks to rein in rates that some say are the highest in the nation, reform supporters offered at least modest praise for the changes offered on Wednesday.
But after Republican members of the committee huddled in small groups, Chairman Bill Blessing, R-Cincinnati, said there would be no vote, and no amendment would be accepted. "Everybody knows what’s in the amendment, so we have time to walk away and digest it."
That didn’t stop bill sponsor Rep. Kyle Koehler, R-Springfield, from stepping up to describe changes worked out largely by Rep. Kirk Schuring, R-Canton, the No. 2 House leader who, as of May 1, will take over as interim speaker following the resignation of Speaker Cliff Rosenberger, R-Clarksville.
Rosenberger is resigning amid an FBI probe that, sources say, is related at least in part to a trip he took to England late last summer that involved payday industry lobbyists. He also took a trip to France in the fall partially sponsored by payday lender, Advance America.
"I’m disappointed. I was hoping to have this voted on today," Koehler told his colleagues. "My concern, obviously, is getting this done. My concern also is misinformation."
Rep. Dorothy Pelanda, R-Marysville, was among those on the committee who did not want to accept the amendment, even if the bill wasn’t getting a full committee vote for at least another week.
"I want to explore all sides of it so I’m truly comfortable understanding it," she said.
Others wanted to see the amendment accepted, as has been done countless times with other bills.
"I’m frankly disappointed that we are not accepting the amendment so we can continue the discussion in committee, where the work gets done," said Rep. Ryan Smith, R-Bidwell. "It’s important we move this forward."
Critics say Ohio payday lenders charge annual percentage rates exceeding 500 percent and trap people in a cycle of debt, requiring borrowers to repeatedly take out new loans, with new fees, to pay off old ones.
Ten years ago lawmakers approved and voters upheld a law to significantly cap payday interest rates — but payday lenders got around it.
Koehler, R-Springfield, has been butting heads with House leadership for months over his bill, which the payday industry argues could put it out of business.
Some GOP House leaders said the original bill was too prescriptive, so Schuring set out to find a compromise. He floated a host of proposals three weeks ago, but payday critics called them largely hollow.
Schuring tried again, and this time emerged with changes that Koehler agreed would be a significant improvement over the current system. Among the key proposals:
• Loan terms could not be less than 180 days, while interest and fees are capped at 50 percent of the loan amount.
"Those two things together keep someone from being charged an enormous amount of money per month," Koehler said.
• Payday lenders must operate under Ohio’s Small Loan Act, and could no longer operate as credit services organizations. "We have to put payday lending in a piece of (law) that actually has some guidelines," Koehler said. It would for loans up to $5,000.
• Limits payments to 15 percent of a borrower’s monthly income.
"Though it’s far from optimal and allows excessive pricing ... the bill is still a step forward and will make Ohio families better off," Alex Horowitz, senior research officer for The Pew Charitable Trusts, said of the proposed changes.
Ted Saunders, CEO of Community Choice Financial, which includes more than 90 CheckSmart stores in Ohio, spoke on behalf of the Ohio Consumer Lenders Association and told lawmakers the new proposal is "unworkable." He got no questions from the committee.
"It’s very complicated to set an arbitrary term, and arbitrary maximum payment," he said later. "It’s very difficult to adequately serve consumers when you’re hamstrung by absolutes."
Saunders said he would accept some reforms, such as minimum term of at least one month, paired with an interest-free extended payment plan if a payment cannot be made.
The necessity of short-term lending is driven by the number of people living paycheck-to-paycheck, Saunders said.
"I didn’t create a product and make a market," he said. "The people of Ohio push demand and we try to meet demand."