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News - Poor Credit Payday Loans

Payday lenders can try ballot issue

Some officials criticize partial repeal

Friday, July 11, 2008

Ohio payday lenders can start collecting signatures for a ballot referendum that, if approved in November, would let them continue charging the same interest rate as they do today.

Attorney General Nancy H. Rogers certified a petition summary that calls for a partial repeal of Ohio's new payday-lending law, now slated to take effect Sept. 1. But at the same time, she and others are warning that the effort could cause legal confusion by leaving two contrasting statutes in Ohio law.

Two laws "will be inherently confusing to prospective petition signers," Rogers wrote in a letter to the Reject HB 545 Committee, adding that her concerns did not give her standing to reject the petition summary as not fair or truthful.

In a second petition, the committee proposed repealing the entire bill. But for a second time Rogers rejected that petition summary, calling the 17-page submission "far too lengthy."

That leaves Ohio payday lenders with one option: asking voters to repeal only Section 3 of the bill, the portion that would eliminate current law related to the loan amount and interest rates.

If approved in November, one part of the law would say payday lenders could charge a 391 percent annual interest rate ($15 per $100 on a two-week loan), while another part would say the limit is 28 percent.

"It provides a menu of regulated lending options for consumers who desperately want this service," said Kim Norris, spokeswoman for the payday-lending committee.

Sen. Jeff Jacobson, R-Vandalia, said the referendum "makes a mockery of Ohio law."

"You can't have a law that says you can't do it and you can," he said. "Of course, their campaign is not going to be based on an explanation that says, 'Please let us continue to gouge people in Ohio.' Instead, it's going to be: 'Give people choices.' "

The committee needs 241,365 valid signatures to qualify for the November ballot -- a process it must complete by Sept. 1, 90 days after the bill was signed by Gov. Ted Strickland.

The law would not take effect until after the November election if enough signatures are collected.

Ohio's 1,600 payday lenders have argued that a 28 percent interest rate would put most of them out of business, eliminating a vital source of credit for those with nowhere else to turn. Payday opponents have argued the businesses prey on the poor and push too many people into a cycle of debt, where they repeatedly need new loans to pay off old ones.

Regardless of what happens to the referendum, Ohio's existing Small Loan Act still allows lenders to offer loans at a 28 percent interest rate and a $15 origination fee: about $18 for a $300 two-week loan, compared with the $45 for payday loans.

Source : http://dispatch.com