Ohio’s Payday Lending Controversy, Explained

The sudden resignation of House Speaker Cliff Rosenberger in response to an FBI inquiry has highlighted the enormous political influence of the payday lending industry at the Ohio Statehouse. News outlets are reporting that at the center of the inquiry is an overseas trip on which Rosenberger was accompanied by lobbyists for payday lenders.

The payday lending industry is active in Ohio politics and, according to the Columbus Dispatch, has made $1.6 million in Ohio campaign contributions since 2009—the vast majority of which went to Republicans. Payday lending in Ohio is as lucrative as it is powerful, thanks to Ohio’s lax regulations. This hands-off approach has led to Ohio having the highest payday lending interest rates in the nation, with a typical loan carrying a 591% annual interest rate, or APR. These exorbitant interest rates have caused many working poor Ohioans to get trapped in a cycle of debt, in which they take out new loans to pay off old ones.

Ohio has attempted to protect consumers from these predatory lending practices before. In 2008, lawmakers passed a bill setting a maximum APR for short term loans of 28% and capping loan amounts. This led to the payday lending industry launching an attempt to overturn the legislation via a referendum. The industry ultimately spent $19 million on the campaign, but was soundly defeated by Ohio voters, 64% of whom voted to uphold the law.

However, this vote proved to be a moot point as payday lenders were able to exploit loopholes in Ohio law to continue their previous predatory practices. They did so by operating under another section of the Ohio Revised Code originally intended to allow lenders to make loans to consumers to pay off credit card debt.

In March of 2017, there was cause for optimism. Lawmakers from both parties introduced House Bill 123, a proposal that would institute meaningful reform to Ohio’s payday lending laws. The proposal was lauded by groups including The Pew Charitable Trusts for its protections for Ohio consumers. Nick Bourke, the Director of Consumer Finance at Pew, called HB 123 “the best example of a workable compromise on the payday loan issue” he had seen. Despite this – or perhaps as a result – the bill stalled for most of 2017, all while, industry lobbyists were accompanying the top House Republican on overseas trips.

But when a coalition announced it would work to place a reform measure on the ballot (which has been sidelined by a ruling of the Ohio Attorney General), lawmakers began 2018 working once again to advance the bill out of committee.

Today that process hit a snag. HB123 was scheduled this morning for a committee vote after the adoption of new amendments. These amendments were largely worked out behind the scenes by Representative Kirk Schuring, the 2nd-ranking House Republican, who advocates say worked behind the scenes to water down the bill. Ultimately, the House Government Accountability and Oversight Committee took no action on the measure.

It is clear that any reforms – watered down or not – will be vehemently opposed by the payday loan industry. If the past 10 years are any indication, thanks to generous contributions to the campaigns of mostly-GOP lawmakers, the industry is likely to get their way.