The Payday Loan Referendum in Ohio

Does the Consumer Need Protection from High Interest Loans?

The Ohio Legislature recently passed a bill that would hold 'Payday Loan' interest to a 28% annual rate. This law has not yet gone into effect, and Ohioans For Financial Freedom, a group formed to promote the interests of Payday lenders, has initiated a campaign of radio and television ads and started a petition initiative to get the measure on the ballot for a statewide vote in the November 4 election.

Payday lenders have thrived in recent years. For low income consumers who have been shut out of customary banking or made a conscious choice not to use other financial institutions, this option has become increasingly more desirable. These businesses combine a number of necessary services under one roof. For a fee, a customer may cash just about any check with no waiting period.
They may pay utility bills, make wire transfers, buy stamps, money orders, bus passes and prepaid debit cards.

The Payday loan, a short term 'advance' against future earnings offered to those who might not qualify for loans from mainstream financial institutions, is the service at issue. These loans allow customers to walk in, present a pay stub, utility bill and valid personal check and walk out in minutes with cash, money today in exchange for a post-dated check for the loan amount plus a fee. The Pay Day Loan office will deposit the check on the specified date unless you opt to pay another fee to defer that deposit. These fees are the focus of recent Ohio legislation alleging they amount to an effective annual interest rate as high as 391%.

The new law, House Bill 545, is scheduled to take effect on Labor Day, and the reduction to a maximum 28% rate is a done deal; but the O.F.F.F. is fighting its implementation with ads that extol the virtues of these loans and encourage voters to sign petitions. Elements of their campaign have been alleged to be misleading. The Cleveland Plain Dealer called one of their television commercials "half-truth." A Cincinnati Enquirer reporter interviewed residents of a Butler County homeless shelter who say they were paid a dollar a piece for their signatures on the petition, a fifth degree felony under Ohio law.