COLUMBUS -- State lawmakers Kyle Koehler (R-Springfield) and Mike Ashford (D-Toledo) have introduced legislation to reform a payday lending market that charges the highest rates in the nation.
“Our proposed reforms would bring stratospheric borrowing costs back down to earth from their hyper-inflated current levels,” Rep. Koehler said in a press release. “These adjustments are long overdue. They will help our state’s hard-working consumers using a proven model that will still preserve access to credit in Ohio.”
More than a million Ohioans have taken out high-cost payday loans. Ohio today has the highest payday loan rates in the nation -- an average annual percentage rate (APR) of 591%. A typical Ohioan who has a $300 payday loan out for five months must pay back more than double the amount ($680) in interest and fees alone.
The legislation introduced Wednesday would ensure monthly payments do not exceed 5% of a borrower’s gross monthly income. The bill also sets a maximum on how much payday lenders can charge, limiting the annual interest rate to 28% plus monthly fees of 5% on the first $400 loaned, or $20 maximum.
“Unfortunately, many payday lenders are geared toward taking advantage of households that are living paycheck-to-paycheck,” Ashford said in a press release. “For too many families, this makes it impossible to pay off the 591 percent loans and, as a result, Ohioans are living behind the financial eight ball for a long time. We hope to change that with this legislation.”
Recently, the Cuyahoga County Mayors & Managers Association voted to support the reform effort. Northeast Ohio groups signing onto the effort include the Cuyahoga County and Lake County Veterans Service Commissions, Neighborhood Housing Services of Greater Cleveland, the East Akron Neighborhood Development Corp. and others. Statewide supporters include the Ohio Job & Family Services Directors Association, Ohio Council of Churches, Catholic Conference of Ohio, Ohio Poverty Law Center and Ohio CDC Association.