by Marc Kovac
Capital Bureau Chief
Columbus -- The Ohio House passed legislation capping interest rates and adding other regulations to the payday lending industry -- but not before threatening to include a ban on Keno gaming in the state.
House Bill 545, sponsored by Rep. Chris Widener, a Republican from Springfield, was approved on a split vote of 69-26; it heads to the Ohio Senate for further consideration.
Widener, who is chairman of the committee that for months has been considering several separate bills regulating payday lending, introduced his legislation April 29. It was forwarded to the floor after a packed committee hearing April 30.
Widener said the legislation is needed, because the existing check-cashing laws have proved harmful to communities and citizens, trapping many in cycles of debt.
An estimated 6.4 million payday loans, totaling upward of $3 billion, are made annually in Ohio, he said. And payday loan storefronts have grown to 1,600 locations this year from 106 a decade ago.
"Consumer debt in Ohio and in the entire United States of America is at an all time high," he added. " ... We've got to step up and do something ... It's not working for families, it's not working for consumers."
The legislation caps the interest rates charged on payday loans at 28 percent (compared to nearly 400 percent now) and prohibit lenders from adding additional fees, interest or costs. Individuals could borrow up to $500 or 25 percent of their monthly pay.
It would limit borrowers to four payday loans per year, prohibit them from taking out a new loan to pay off an old one and require consumer education courses for those who take out two loans within a three-month period.
The bill also would create a new statewide database to track loan information for all borrowers.
Opponents said the bill would have a devastating effect on the payday loan industry, likely closing locations and costing 6,000-plus Ohioans their livelihood. They also questioned where people strapped for cash and facing emergencies would go for smaller, short-term loans.
Rep. Bob Gibbs, a Republican from Lakeville, who voted against the bill, said individuals borrowing $500 under the terms of the legislation would pay back about $5 -- not enough to cover the costs and the risks of providing unsecured loans to customers.
Gibbs said he thought having a real-time database in place that could ensure customers have no more than one loan outstanding at a time was a better solution.
"What frustrates me is I think we can fix this problem and not [cause] over 6,000 people to go to the unemployment line," he said.
The bipartisan cooperation on the bill was nearly undone by surprise amendment offered by Rep. John Adams, a Republican from Sidney, that would have prohibited the Ohio Lottery from expanding into Keno gaming.
The amendment initially passed on a vote of 49-46, despite a Democratic outcry over the timing. Following a short party caucus, it was reconsidered and removed from the legislation.
Speaker Jon Husted, a Republican from Kettering, said he allowed the amendment as a means for members of his caucus to voice their opposition to Keno and its potential effect on poorer Ohioans.
"There are a large number of them who feel strongly about it and wanted to have the opportunity to make that point today, which I think they did," he told reporters afterward. He added, "My job here today was to try to get a bill accomplished to try to protect consumers, and I believe that we did that."
Marc Kovac is the Dix Newspapers Capital Bureau chief. E-mail him at mkovac@dixcom.com.