Dayton Daily News

Issue 5 State of Ohio

Issue Information:

Referendum on Legislation Making Changes to Payday Lending Practices. (A referendum on Section 3, House Bill 545)

League Explanation of Issue 5: Voters are being asked if they want to uphold the legislature's repeal of lenders' authority to charge interest that could be as high as 391%. If the referendum is approved (the "yes" votes prevail), all short term lenders, including payday lenders, would be subject to the following limitations:
•Cap the interest that payday lenders can charge consumers at 28%.
•Limit the amount consumers may borrow from payday lenders to 25% of their monthly income, up to $500 per loan.
•Limit consumers to four short-term loans per year.
•Provide for a minimum of at least 30 days for a borrower to repay a loan.

Proponents of the referendum argue that:
1. The new regulations would cap the interest for payday loans at 28%, which effectively ends lenders' ability to charge up to 391% interest.
2. Limiting the number of loans customers can take out annually would help break the cycle of debt in which many customers find themselves trapped. Data show that 99% of payday loans go to repeat borrowers - who typically take out 12 or more loans a year.
3. Passage of Issue 5 would give borrowers more time to repay a loan - and by limiting the amount a consumer can borrow, would help insure that customers do not borrow more than they can afford to repay.

Opponents of the referendum argue that:
1. The 28% ceiling on interest rates will not allow lenders to make enough profit to stay in business; lenders will be forced to close locations convenient for borrowers and jobs will be lost.
2. The loans provide emergency assistance to cash-strapped borrowers who have no other credit options - and the loans are more affordable, if repaid promptly, than bank overdraft fees and credit card late fees.
3. A borrower's choice is limited if the number of loans available in a year and the amount of each loan is curtailed. Each borrower should have the right to make their own financial decisions without government restrictions.

Websites:
In support of placing new restrictions on payday lenders:
PROTECT HB 545 Committee (http://www.yesonissue5.com/)

In opposition to placing new restrictions on payday lenders:
The Committee to Reject H.B. 545 (www.ohioans4financialfreedom.com )