Ohio HB 545 Zombies Cry Foul When Payday Loans Play Fair

House Bill 545 doesn’t play nice with other laws

Wallet, meet overdraft fees

Payday loans in Ohio have weathered the storm of House Bill 545. This we know.  But let’s take a closer look at what opponents of payday loans are concerned about. An editorial by Marc Kovac of Dix Communications, a media conglomerate that no doubt has interest in the banking industry, should shed some light on the matter.

Governor Strickland has voiced concern that if lenders are using Ohio’s Small Loan Act to lend at the same rates as before, they may be violating the new law of House Bill 545. So what he’s saying is that the pay day loan companies left in Ohio may be breaking the law by following the law. Not only is that not the problem of the lenders, but it should be noted that lenders are working within applicable laws. They are cooperating with state government.

Payday lenders cooperate, adapt

Payday loans have adapted to existing laws. When House Bill 545 placed an oppressive 28 percent annual interest cap on short-term consumer loans, stores closed and hard-working individuals lost their jobs. None of this was necessary. Those against HB 545 predicted that the bill would put 6,000 Ohioans out of work. Much of that fear was recognized once the bill passed. Over 500 stores closed, according to Ohio Department of Commerce Legislative Director Ernie Davis.

According to Kovac, State Attorney General Richard Cordray identified the usage of the Small Loans Act as a “loophole.” Here’s how he put it:

… I believe that none of you realized that the language you drafted in the legislation left a loophole in Ohio law … to continue gouging consumers through exorbitant fees… some lenders are still charging fees and interest on small loans that may add up to an annual percentage rate of in excess of 300 percent. This is substantially equivalent to the fees charged by payday lenders under their previous business model.

Banks want overdraft fees, not payday loans

It is equivalent, yes. Of course, the 300-plus percent APR is irrelevant. It amounts to political chicanery on Cordray’s part, as payday loans are two-week loans that charge 15 to 25 percent of principal as the loan fee. Now, under the Small Loan Act, opponents are also crying about the check-cashing fee lenders in the state are charging if customers want to cash their checks there. Yet this still falls under the “equivalent fees” Cordray is braying about.

If Dix Communication indeed shares the same interest banks have in attempting to ban payday loans, what would that rather large interest be? Without a doubt, banks want customers to rely upon their equivalent product, overdraft protection. It is MUCH more expensive than using payday loans for emergency cash. Banks want your money however they can get it. Why not use a less expensive product when you’re in a jam. Use payday loans.