COLUMBUS, Ohio--(BUSINESS WIRE)--The Consumer Financial Protection Bureau (CFPB), a government agency that regulates financial products, today released a federal rule to guard against harmful payday and auto title loans – curbing two-week or one-month loans that turn into long-term debt traps. While leaders of Ohioans for Payday Loan Reform (OFPLR) support this new federal standard wholeheartedly, they caution that Ohio’s payday lending problems won’t be resolved without state-level action.
“The CFPB regulations are a sensible first step,’’ said long-time Ohio payday reform advocate and Chair of the Coalition for Safe Loan Alternatives, David Rothstein. “States like Ohio have more work to do to rein in unconscionable, high-cost, longer-term loans. For struggling Ohioans these extended debt-trap loans become anchors on already sinking ships.”
Currently, payday and auto title lenders in Ohio are exploiting a loophole in state law in order to broker loans of more than 45 days with unlimited fees and no consumer safeguards, and those longer-term loans are not covered by the CFPB’s recent action which only covers loans lasting 45 days or fewer. Examples of loans being issued in Ohio that will continue outside of the CFPB’s rule include a $500, 6-month loan where the borrower repays $1,340, and a $1,000, 1-year loan where the borrower repays $4,127.
“These loans, issued mostly by out-of-state companies, drain resources from local families and harm our communities,’’ said Pastor Carl Ruby, another leader of OFPLR. “For too long, our state legislature has waited for others to solve the payday loan problem. Now that the federal regulation is complete, there are no more excuses. Ohio lawmakers need to protect Ohioans.’’
Without sensible laws in place, borrowers are left with bad options. Doug Farry from TrueConnect, an employee benefit program that helps employees access an affordable bank loan, said while the CFPB rule is good, it won’t bring down prices in Ohio. It’s now up to state legislators to rein in the payday loan market. “While we’re providing access to loans below Ohio’s 28% rate cap, payday and auto title lenders are still finding ways to charge triple digit interest rates to consumers,” Farry said. “It’s good that the CFPB’s rule will address harms of unaffordable short-term loans, but it’s only a first step. Looking forward, Ohio still needs to pass HB123 to close the loopholes in state law, and better alternatives need to be made more available to consumers.”
The bipartisan Ohio House Bill 123, introduced last March by Rep. Kyle Koehler (R-Springfield) and Rep. Michael Ashford (D-Toledo), is a proven model that has succeeded elsewhere and maintains access to credit while bringing down prices, making payments affordable and saving Ohio families more than $75 million per year.
Despite popular support for the bipartisan bill, Ohio’s top lawmakers have hesitated to give the bill a public hearing or a vote. “House Speaker Cliff Rosenberger (R-Wilmington) should not delay this bill any longer,” Ruby added. “Allowing this bipartisan reform to move forward, will show real leadership on behalf of Ohioans who are struggling under the weight of 591% APRs. By refusing to allow a public hearing, Rosenberger is showing that his priority is the six companies that control 90 percent of Ohio’s payday loan market who charge Ohio families four times more than they charge in other states.’’