COLUMBUS - The Ohio Senate today overwhelmingly passed House Bill 545, legislation which will better regulate the "payday" lending industry in Ohio to protect Ohio consumers from getting trapped in a cycle of debt.
The bill caps interest rate for payday loans to 28 percent, limits the amount a consumer can borrow to no more than $500 or 25 percent of a consumer's base monthly pay, whichever is less, limits the number of payday loans a consumer can take out to four per calendar year and prohibits loan origination fees and extends the duration of the loan to 31 days, giving consumers more time to repay.
Harris explained that while the premise of payday lending is to provide short-term assistance to those who are struggling to make ends meet until their next paycheck comes in. Unfortunately, legislators are hearing from more and more consumers that they are overextending themselves while using these services and getting trapped in a vicious cycle where they are taking out loans to pay the previous loan.
He compared the action the Senate is taking today to passage of the Homebuyers' Protection Act last General Assembly, which provided new protections to homebuyers as they enter into home loan agreements.
"While I fundamentally believe that consumers have a responsibility to understand the consequences and terms of any loan agreement they choose to enter, there must be protections in place to ensure that when someone is struggling financially and arguably at their most vulnerable state, they cannot be taken advantage of."
As part of amendments adopted by the Senate Finance Committee today, the Senate closed a potential loophole by removing a provision in current law that would have allowed credit unions to offer a product similar to the payday loan structure that exists today.
Despite claims by the payday lending industry that under the new regulations they will have to close their businesses and consumers will have no place go to get short term assistance, Senator Harris stressed that there will be opportunities for lenders to provide short-term loan products to meet consumer demand, regulated under the existing Small Loan Act.
Having passed the Senate, House Bill 545 will go back to the Ohio House for concurrence before being sent to the Governor.
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