[October 26, 2008] EDITORIAL: Yes on Issue 5: Allow payday-lending law to go into effect to avoid statutory chaos Tweet Oct 26, 2008 (The Columbus Dispatch - McClatchy-Tribune Information Services via COMTEX) -- Deciding how to vote on State Issue 5, a referendum on the state's new payday-lending law, isn't easy. A yes vote will allow the statute to go into effect in its entirety, tightening regulation of an industry that fills a niche in the financial marketplace. The new law might force many payday-lending, or check-cashing, businesses to close their doors, leaving their employees without jobs and their customers in the lurch when they need money in an emergency. But a no vote on Issue 5 would be worse because it would put contradictory laws into the Ohio Revised Code, setting different limits on the amounts and interest rates of small loans. Ohio Attorney General Nancy H. Rogers, in certifying the referendum petition summary in July, lamented that it failed to warn signers "of the possible result that two conflicting laws might be in effect." The courts probably would have to resolve such conflicts. To prevent such statutory chaos , The Dispatch recommends a yes vote on State Issue 5 to allow Section 3 of Substitute House Bill 545 to go into effect. A yes vote will set a $500 maximum on loans provided by short-term lenders, including payday lenders; will cap the annual interest rate on such loans at 28 percent; and will require lenders to allow borrowers at least 31 days to repay a loan. The payday-lending industry, through its referendum petition, brought State Issue 5 to the Nov. 4 ballot in hopes of persuading voters to overturn Section 3 of the new law. A no vote on the issue would allow payday lenders to continue charging an annualized interest rate of 391 percent -- that is, $15 per $100 borrowed for two weeks. They also would be permitted to make loans up to $800 maximum, with no minimum time for repayment. The industry also has complained about potential privacy violations caused by a provision of House Bill 545 that establishes a statewide database for lenders to consult in determining a borrower's eligibility for a short-term loan. This provision is not addressed in Section 3, however, so votes on Issue 5 would not affect it. The database is intended to help enforce a portion of the new law that limits borrowers to no more than two short-term loans in 90 days and four in a year. State lawmakers want to prevent Ohioans from becoming trapped in a cycle of debt that occurs when they borrow from one short-term lender to pay off another, over and over. The Dispatch believes that while citizens have the right to seek changes in state laws through ballot issues, the process should be used judiciously. A referendum petition offers voters a tool to rein in a reckless legislature that has passed laws hastily without allowing full public hearings and discussion of an issue. House Bill 545, however, is not such a law. It stems from efforts that began more than a year ago. The bill drew bipartisan support and received a full and fair hearing in the General Assembly, where the industry had ample opportunity to make its case for preserving the status quo. The bill passed by overwhelming margins in both chambers, which are dominated by Republicans. Republicans tend to favor less regulation of business but in this case felt government needed to take a bigger role. Gov. Ted Strickland signed the bill June 2, and all of it except Section 3 went into effect last month. One premise driving the no side of the Issue 5 campaign is that payday lenders are going to pack up and leave Ohio, laying off 6,000 people. But of about 1,600 offices that have payday-lending licenses, so far 1,130 have applied for the state's small-loan licenses, according to the Ohio Department of Commerce. Clearly, these businesses intend to continue serving Ohioans' borrowing needs. Payday lending is a young industry that offers a legitimate alternative to many people, including those with poor credit histories and little steady income. As the credit market tightens, the need for these lenders could increase. State lawmakers should monitor the effects of House Bill 545 carefully to ensure it does not produce more hardship than it prevents. The two major-party candidates for Ohio attorney general and three former holders of the office are calling on Ohioans to vote yes on Issue 5: State Treasurer Richard Cordray, a Democrat, and his opponent, Republican Mike Crites; Ohio Lt. Gov. Lee Fisher, a Democrat; and Republicans Jim Petro and Betty D. Montgomery all agree that State Issue 5 offers Ohio consumers important protections. Ohioans, regardless of their view of payday lenders, should vote yes on State Issue 5 to ensure uniformity in state laws regulating short-term loans. To see more of The Columbus Dispatch, or to subscribe to the newspaper, go to http://www.columbusdispatch.com. Copyright (c) 2008, The Columbus Dispatch, Ohio Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. [ Back To TMCnet.com's Homepage ]