Legislation seeking tighter payday lending regulations in Ohio is now headed to the Ohio Senate, where President Larry Obhof says the issue is a priority.
But some industry critics worry how the Senate plans to handle the short-term lenders, whose terms often cause low-income borrowers to take out multiple loans before paying off the original amount.
In 2010, the last time payday lending legislation came up for a vote in the Statehouse, nine current Senate Republicans voted against it, back when they were members of the then-Democratic controlled Ohio House.
They include Sen. Matt Huffman, R-Lima, who Obhof assigned as the point person for Senate Republicans on the issue. Huffman also voted against the 2008 payday legislation that was overwhelmingly upheld by voters, though lenders found ways to avoid the rate cap imposed in that bill.
"The overall tenor of our caucus is that people shouldn’t be trapped in a spiral of debt where 590 percent APRs are not appropriate," said Obhof.
The Senate is trying to determine all the things that add up to equal that annual percentage rate, and how many of them are appropriate, the Medina Republican added.
The House on Thursday voted 71-17 for House Bill 123, which would lower interest rates and limit loan payments to 5 percent of a borrower’s gross monthly income.
In an unusual move, the House passed the bill without changes — following former Speaker Cliff Rosenberger's resignation amid an FBI investigation into, among other things, overseas trips he took with payday lobbyists.
Senate is unlikely to pass the bill as-is.
But Obhof said he doesn’t think the Senate will struggle to pass a bill. "We tend to work together pretty well."
The payday industry has given $1.8 million in disclosed Ohio contributions since 2010, while employing a cadre of lobbyists including former state Sen. Jeff Jacobson and Neil Clark, who has close ties to some GOP senators.
Sen. Jay Hottinger, R-Newark, is one of three current GOP senators who voted in favor of the 2010 payday lending bill when in the House, joining Sens. Scott Oelslager of Canton and Peggy Lehner of Kettering. That bill sought to prohibit payday lenders from charging customers to cash their own checks, while limiting other fees.
"I don’t think anyone with a straight face can tell you 450 percent APR is conscionable," Hottinger said. "There have been people who are being fleeced by this industry."
But Hottinger, who doesn’t yet have an opinion on the House bill, doesn’t want to kill off the short-term loan industry.
"There are people who need access to equity or cash and they don’t qualify for bank loans," he said.
That, in a nutshell, is the unicorn of the payday debate: finding regulations that the payday industry says it can work with, but are also tough enough for industry critics.
For example, as it argued in 2008 and 2010, the industry says the new House bill it will kill off their stores, eliminating credit options for 1 million people.
When Rep. Kirk Schuring, R-Canton, the House GOP point person on the issue, proposed to amend the bill in mid-April, the payday industry said that also was unworkable.
A month earlier, when Schuring rolled out concepts that the payday industry generally agreed with, the Pew Charitable Trusts, a key advocate for lending reform, called it a "hollow proposal."
"The bones of HB 123 are really strong," said Nick Bourke, director of Pew's consumer finance project. "If anybody in the Senate is concerned that the business model is not rich enough or the loans aren't going to be big enough, we can talk about that. But this is not the point to question the fundamental model or try and reinvent the wheel."
If payday critics don't get strong reforms, they plan to push a statewide ballot issue in November 2019.
The Senate has one more session day in June before summer break. Obhof said he plans to return for at least one more pre-election session in August or September, which could be used to address the payday issue.
"I do not anticipate this dragging out for the rest of the year," he said.