Congress Weighs Payday Lending Changes

March 26, 2014
Dayton Daily News 
payday lending news
The Ohio General Assembly passed a bill in 2008 to crack down on payday lenders in the state, but it has simply allowed those products to be replaced with auto title and installment loans, according to David Rothstein from Neighborhood Housing Services of Greater Cleveland. Speaking at a hearing of the Senate Banking Committee’s subcommittee on financial institutions and consumer protection, Rothstein said the 2008 law -- which curtailed interest rates, loan amounts, and the number of loans in the state -- effectively “morphed” into auto title and installment loans. These products, he stressed, still harm consumers and can cause them to lose their car to repossession or struggle to pay off loans with triple-digit interest rates.

Sen. Sherrod Brown (D-Ohio), who chaired the hearing, argued that such products are predatory. They are marketed as short-term loans and are often used to cover basic expenses. Brown said that consumers get trapped “in a cycle of debt that leaves them worse off than they started.” He noted that about 12 million Americans use payday loans each year, making it an $80 billion per year business. The Consumer Financial Protection Bureau released a report this week that found that more than 80 percent of payday customers often renew those loans or take out another loan within 14 days.

Other lawmakers, however, are concerned that a crackdown on short-term lenders would limit consumers’ ability to borrow when they need cash. They have criticized the Department of Justice's partnership with regulators to go after short-term lenders, saying it could shut down the whole industry.

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