Ohio Payday Loans on Ballot

Payday Loan Business May Be Voted Out of Existence in Ohio

COLUMBUS, Ohio -- In the spring of 2008, the Ohio House of representatives passed HB 545. This bill was signed by the Ohio Governor Ted Strickland on June 2. The bill placed major restrictions on the interest rates of short-term loans, capping them off at 28%. The previous cap worked out to an annual percentage rate of 391%. The bill also sets a $500 limit on the amount of the loan and allows for a 31-day repayment.

Most if not all payday lenders could not continue to stay in business with a 28% APR cap on payday loans. To avoid having to stop doing business in Ohio, payday lenders formed a group called "Ohioans for Financial Freedom." This group began a petition drive to put an initiative on the November ballot that would repeal part of the law that caps the interest rate.

Ohioans for Financial Freedom have already been running advertising to encourage people to vote for the repeal of HB 545. Their view is that Payday loans are good for emergencies, such as car repairs. If someone needed to get a car part, they could borrow $100 and pay back $115 on payday. Payday loan companies employ about 6,000 Ohioans. Should the law not be repealed, they would all be out of work.

The Ohio Coalition for Responsible Lending is one of the groups that are working to have the ballot measure defeated. They explain that the payday lending model is flawed by design. There are numerous stories of people who got caught up in an endless cycle of taking out a loan, and not being able to pay it back without getting another loan, and end up being sucked into a financial whirlpool. They believe that the 6,000 jobs lost would not be value-added jobs.

Ohio voters will finally decide in November. According to a Zobgy poll taken in May 2008, 84% of voters felt that it should be up to the individual how he or she acquires credit. 70% said the government should not be telling people whether or not they could get a payday loan.

Intense political advertising from both sides of the issue may make this a closer vote in November than it would be if voted on today. One thing that is certain, people in Ohio will be talking about this issue and the other referendums on an already crowded ballot.