Akron Beacon Journal Editorial
Plug those loopholes
Payday lenders have thumbed their noses at Ohio voters.
State lawmakers must end the exploitation of borrowers
Published on Friday, Apr 16, 2010
Payday lenders lost a big battle in 2008 when Ohioans agreed with the
Statehouse on legislation that capped outlandish interest rates, but they didn't
give up the war to fleece borrowers. State lawmakers should be equally
tenacious in protecting consumers from being exploited.
Payday lenders have taken advantage of existing laws (such as those designed
for installment payments), which enable them to skirt the limits on payday loans
imposed by House Bill 545. A key element in that legislation was the limit of a 28
percent annual interest rate on short-term loans taken out for at least 30 days.
The goal was to prohibit lenders from charging interest and fees that amounted to
391 percent on a two-week loan. For consumers, who typically take out 10 to 12
of these quick loans a year, the convenience came at a huge cost: constant debt.
Unfortunately, that goal has been subverted. Within months of approval of the
new law, payday lenders began exploiting loopholes in laws for mortgage and
small loans and tacking on additional fees and charges. As a result, borrowers
are paying rates that far exceed what they were paying before the interest rate
The lenders effectively have nullified H.B. 545. It is an embarrassment to Ohio
lawmakers to have been thus outmaneuvered. Dismaying, too, is that a bill
introduced last year by state Rep. Matt Lundy, an Elyria Democrat, to close the
loopholes has been stuck in a House committee for months without action.
Ohioans voted overwhelmingly in November 2008 to curb excessive charges in
payday lending. Legislators have another opportunity to rein in the exploitative
practices. Lundy and a co-sponsor, Gerald Stebelton, a Republican from
Lancaster, introduced a new bill last week, House Bill 486, that promises to stop
lenders from abusin