Ohio House Republicans balked at passing a bill to reform the payday lending industry just hours after the top Republican leader stepped down amid an FBI inquiry. Sources suggest that inquiry is tied to inappropriate contact with payday lobbyists. The bill was slated for a vote before some House leaders slammed on the brakes.
A House committee room was full of consumer advocates and the top players for the payday lending industry, including store owners and lobbyists, as Republican Representative Kyle Koehler laid out some changes he wanted to add to his bill.
“We have to put in a piece of statute that actually has some guidelines," he said.
Among the changes in his amendment is a requirement for longer loan periods to give borrowers more time to pay of their bills. Koehler said this would avoid one of the pitfalls of short term borrowing when someone only has a few weeks to pay off their loan so they take out a new one, with new fees and new interest rates, to pay off their initial loan.
“If I don’t have to come in in two weeks and I can just make six payments over six months that’s gonna stop the churning," Koehler said. "The person that borrows the $300 is not going to come back in two weeks for another loan because they’ve got the money they needed. The reason they’re coming back in two weeks is because they couldn’t pay the loan off.”
Koehler and his Democratic co-sponsor, Representative Michael Ashford, have been pushing for a crackdown on payday lenders for more than a year.
The bill was set for a vote in the House Government Accountability and Oversight committee, but that didn’t happen. They didn’t even hold a vote to accept or table the amendment, which is an unusual move.
Republican Representative Louis Blessing chairs the committee. He says the decision to sit on the bill was to give members more time to look over the changes.
“Everyone knows what’s in the amendment so we have time to walk away digest it, everyone can relax and we’ll move from there," Blessing said.
Fellow Republican Rep. Bill Seitz was vocal about his desire to postpone the vote. So was Republican Dorothy Pelanda.
“This is less than 24 hours and a 27-page amendment that according to the sponsor, substantially changes the bill causes me real concern," she said.
In the shadow of Rosenberger's resignation
This committee met just hours after Republican House Speaker Cliff Rosenberger announced he would be stepping down May 1 in the wake of an FBI inquiry. The FBI is said to be looking into links between Rosenberger’s international travel and the payday industry.
When asked by a group of reporters, Pelanda did not want to comment as to whether she thought, considering these recent events, if it was important to regulate payday lenders. As for Blessing:
“Anyway I got to take a phone call…” he said. He walked away.
Bischoff said “The fact that the FBI is looking into payday lending…”
Pushing for reforms
Ohioans for Payday Loan Reform have been pushing for Koehler and Ashford’s bill. They say the reason it’s so hard to get anything passed is because the payday lending industry has donated so much money to lawmakers. In the last nine years they’ve doled out $1.6 million in campaign contributions.
Ohio voters approved capping these loans at 28% in 2008, but consumer advocates say the industry has gotten around those caps and that an annual percentage rate can still skyrocket to 591%.
Ted Saunders, CEO of CheckSmart, argues that those high APR’s are a very rare occurrence. He adds that lengthening the loan period gives borrowers an excuse to put off payment.
“I shouldn’t say, ‘well thank you for saying that you can pay it off over your next three or four paychecks and only accrue the fees and interest, which everyone objects to, for three periods let’s instead take it over six months." he said.
It was argued that Koehler’s proposed schedule would keep a flat interest rate and fee whether it’s over two weeks or six months.
“Pretty complicated bill," Saunder said. "I’d have to argue with you we can sit down, get a spread sheet out and start spreading the numbers but it’s not exactly how it works.”
The current timetable
Putting the bill off in committee means it’s likely Ohio lawmakers won’t touch it until after summer break, which might not end until after the November elections. However, Ohioans for Payday Loan Reform are working on putting payday lending reform on the November ballot for that very reason.