ProgressOhio

It’s another of Ohio’s dirty little secrets.

Lenders in Ohio can charge up to 391% APR interest for low-interest loans of up to $500. These loans are banned in West Virginia, Pennsylvania and 11 other states

Studies point out that the average Pay-Day lender customer takes out loans seven to fourteen times a year.

The process works by requiring borrowers to pay a high fee for an advance on their own money. Failure to repay the money results in additional fees every two weeks without receiving new money. A fee of 391% APR on $500 is $45.

And if you think few Ohioans fall prey to these loan sharks, think again. In Ohio, there are 1,562 pay-day lending locations – more Ohio storefronts than McDonalds, Burger King and Wendy’s combined according to Policy Matters and the Housing Research & Advocacy Center who jointly did a February 2007 report that exposed Ohio’s Pay Day lending problem.

Where there are that many storefronts, there is bound to be plenty of profit. The Center for Responsible Lending did a study that found that just one percent of first-time Pay-Day loan recipients pay the money back within two weeks, while 99 percent go to repeat borrowers. When you consider that 7.6 million people receive loans in the United States worth $83 million dollars, the annual cost to financially strapped families is $3.4 billion dollars.

It got so bad for cash-strapped military families that the U.S. Congress slapped a 36 percent cap on loans for military families. Military studies had showed that the pay day loan rates were hurting military readiness and troop morale.

In human terms, a ProgressOhio records request to Ohio Attorney General Marc Dann’s consumer complaint division turned up examples such as an Akron man who borrowed $250 from a pay day lender, a company that used a post-dated paycheck from him as collateral for the cash advance he received.

But he couldn’t repay the high-interest loan under the terms he’d agreed to. He defaulted and soon found himself being charged a $79 “processing fee’’ twice a month. In just a few months, he owed $970 – nearly four times the amount he’d borrowed.

And not everyone victimized by the lenders took out a loan, according to a review of the complaints.

A Vermillion woman told the Attorney General’s Consumer Protection Section that she received a “strange call’’ from a company announcing that she’d received a $300 loan from them.

Later, she learned that her bank account included an unexplained $300 credit – and $1,070 in unauthorized debts. When she called to complain, she found only a recording that asked for her Social Security number. She hung up, and called the AG’s consumer hotline.

So why have Ohio’s legislators been silent on this issue? And why is this a bi-partisan issue where neither party in power has ever reigned in the Pay-Day industry?

Fiscal conservatives have latched onto the issue in the past because they favor a system that leaves more money for consumers – who use that money to drive the economy. Progressives are drawn to the economic justice of the issue. But the right and left, despite a rare moment of agreement many years ago, have never been able to forge a majority to fight back the Pay Day industry.

Let’s face it, with a $3.4 billion profit industry there is plenty of cash to spread around in the legislative process.

Pay Day lenders will argue that they are a last resort for people who otherwise could not receive loans. They also will argue that they are good corporate citizens who work in minority and poorer communities as part of the solution to families in dire need of assistance.

For a House of Representatives within four seats of a shift, and a term-limited speaker, it becomes a lobbying sausage grinder. And in the fight to land beneath the ornamental rising sun of the Ohio sealed Speaker’s Chair, Pay Day lending becomes a gut-check for all that encompasses the sins and souls of governing.

Only beneath the snores of a legislative committee, could the solid scout’s honor of loan sharks charging 391% interest, come off like the angel of mercy. And only in the shadows of our great democracy can the tears of families destroyed by legislative sins be drowned out by PR spin that makes our State cupola appear more like a snake-oil can.

Perhaps the solid citizens of Pay Day lending should tell this to the Columbus woman who said she routinely receives threatening calls. “They call me up to 10 times a day,’’ she said in her complaint, “and threaten to have me arrested or come to my work and ‘see what happens then.’ ‘’

Another Ohio woman was told to “rob a bank’’ if she needed to, according to AG records.

Many experts in predatory lending practices say that pay day lending’s business model is designed to keep borrowers borrowing – and not to provide one-time assistance during a time of financial need. If the money is repaid too quickly, the lenders can’t make the type of hefty profits needed to keep their businesses going.

Many of the Ohio victims are poor, elderly, or minorities.

So you have to scratch your head and tell those pragmatic legislators swayed by Pay Day propaganda, “OK, don’t ban the practice if you wish like our neighboring friends in West Virginia and Pennsylvania who were bamboozled by those pesky citizens who had trouble handling their finance. But couldn’t you at least settle for a cap of 20% or 25% or heavens even 39% in interest?” Can you really look the other way at a 391% interest rate?

You tend to think that sometimes in the merry-go-round of Statehouse politics, legislators in both parties lose sight of the reason we need them in government to begin with. For conservatives, some of whom railed about Pay Day lending in the Riffe years, their rise to power in the ‘90s somehow silenced the conscience and soul of those Pay Day lending protests.

For Democrats with visions of gavels, and increased attention from lobbyists these days, they find themselves at a crossroads. Is the quest for power, more about the ends – or is it about the means? Does the responsibility of being a powerful player, silence the soul or will the sins of the past be cleansed? And the GOP has no clean hands, having looked the other way for over a dozen years.

The question is do we consent to be governed to protect us from “suffering the slings and arrows of outrageous fortune” [decoder: that’s Hamlet my friends] or is government so numbed by the election process that our eyes are blurred and our principals are deaf and all that is left is the hollow corps of a governing prince whose tortured conscience hath gavel, but no will to battle?

Only in the shadow of politics can legislators wake up a justification of a 391% interest charge, no matter what the spin. And only in the shadow of politics, can a little legislative conscience and courage restore faith in the reason we consent to be governed in the first place.

Tell Ohio's Legislators to address Ohio's Pay Day Loan problem