BEACHWOOD, Ohio — For years, the agency I lead — the Hebrew Free Loan Association (HFLA) of northeast Ohio, whose mission is to promote economic self-sufficiency and growth for the people of Northeast Ohio who cannot access safe and fair loan resources – worked with hundreds of consumers stuck in a desperate cycle of trying to pay off outrageously expensive payday loans.
Because Ohio had the highest loan costs in the country – with annual percentage rates on these short-term loans approaching 600%, and we often saw interest rates between 700% and 800% – consumers were unable to repay their original loans. and continued to take out new ones to pay off older loans. This created a vicious circle from which they could not escape. Our organization provided immediate relief to some borrowers through an interest-free loan program, but we couldn’t help everyone, and many consumers didn’t know where to go for help.
So the HFLA joined dozens of other groups and individuals in a two-year effort to enact statewide payday loan reforms to ensure that interest rates on payday loans are limited and that people have enough time to repay the loans.
We weren’t trying to eliminate payday loans in the state, we were just trying to make them fairer for consumers.
Now, more than three years after Ohio’s bipartisan Lending Equity Act was passed, a report from the Ohio Department of Commerce shows the reform is working. The report details that by law, the average payday loan in Ohio in calendar year 2020 – the first full year of data available by law – was $403 and cost $112. in fees; before the reform, a $400 loan cost more than $600 in fees. And in 2020, $99.7 million in credit was extended to Ohioans through quarter million loans.
We see far fewer people coming to us in dire straits because of payday loans they can’t repay. We may have had one last year. Before this law, we had problems with payday loans almost every week.
I believe people still get payday loans, but they are better at paying them back and not taking out one loan to pay off another. It is clearly a successful reform.
Yes, the number of payday loan shops has decreased — for example, there were several on Northfield Road and now there are one or two — but people still have access to these loans.
I warn consumers to be especially careful when obtaining these loans online. We had a woman who came to us after getting seven such loans online with interest rates of 600% and above. They were actually illegal to issue in Ohio and technically this company and others like them cannot collect the loans. But this client didn’t have the stamina to handle collection calls and threats, so we helped pay them.
I want to thank the key lawmakers behind Ohio’s payday loan reform effort, including Republican State Rep. Kyle Koehler of Springfield and Democratic State Senator Vernon Sykes of Akron, as well as my fellow members of Ohioans For Payday Loan Reform. Our law is considered a national model and lawmakers in other states are paying attention to it.
Michal Marcus is Executive Director of the Hebrew Free Loan Association (HFLA) of Northeast Ohio.
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