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Toledo, Ohio & Lake Erie

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       A bill designed to reform what is called predatory short-term lending will benefit working families and consumers in Ohio, State Representative Michael Ashford, D- Toledo, said last week after Gov. John Kasich signed the bill into law.

        “After years of discussions, false starts and negotiations, I am proud that predatory lending reform today is becoming a reality for the consumers and families of Ohio. For the last decade, predatory lenders have exploited a loophole in Ohio law and taken advantage of consumers by charging some of the most outrageous and unfair interest rates and fees in the nation,” Rep. Ashford said.

        Ashford was a joint sponsor of the bill.

        “Our bipartisan reforms in House Bill 123 will ensure Ohioans can still access short term loans, but in a way that’s honest, open and fair … and I look forward to the positive outcomes this effort will have for generations to come,” he said.

        The bill prohibits licensees under the Small Loan Law and registrants under the General Loan Law from making loans of $1,000 or less or with a duration of one year or less.

        It also allows consumers three days to rescind a loan with no interest or fees.

        The bill was supported by local legislators, including representatives Steve Arndt, R – Port Clinton, and Teresa Fedor, D – Toledo, and Sen. Randy Gardner, R – Bowling Green.

        During opponent testimony before the House Government Accountability and Oversight Committee, Ted Saunders, president of the Ohio Consumer Lenders Association, said the short-term loan industry is filling a need and experiencing customer satisfaction rates among the highest in financial services.

        He said special interest groups were behind the bill and patterned it after a similar bill adopted in Colorado.

        “Even a cursory review of the outcome of Colorado’s lending practices shows a clear reduction in the availability of credit. Since this model was put in place in 2010, not a single new storefront location has opened in the state of Colorado and over 48 percent of the storefront locations have closed. The percentage of Colorado consumers who now qualify for short-term credit has plummeted,” he said.

        Saunders said anyone who wanted to operate under the Colorado model could presently do so under current Ohio law but none do because it is an unsustainable business model.

        “Lenders simply cannot make sufficient revenue to cover their employee expenses, rent and utility payments and the losses that necessarily flow from making loans to higher-risk borrowers,” he said.

        Susan Jagers, director of the Ohio Poverty Law Center, said lenders in Ohio have exploited a loophole in legislation adopted in 2008.

        “Now they operate as loan brokers, which enables them to dramatically increase the fees they charge,” she testified. “As a result, we pay the highest prices of any state, and auto title lenders operate with abandon, even though the legislature has never authorized auto title loans. It also enables these companies to make dangerous installment loan products without any safeguards.”

        She said the bill would not put payday lenders out of business, but it would ensure they are competing under a more transparent law.

       

 

 

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