Law breaks the borrowing cycle

[cashlenders]

LANCASTER - The debate about a controversial payday lending bill, recently signed into law by Gov. Ted Strickland, is shifting gears. But it likely won't go away soon.

And if payday lending groups opposed to the new law have it their way, the issue will be put before voters in November.

Standing outside Express Payroll Advance, Lancaster resident Angela Peeples, who was there to purchase a money order, has been on both sides of the issue. She used to work for a payday lender, but has been a customer. She said she's ambivalent about the new regulations that have sent the state's payday loan businesses into a tailspin.

"I've had to use a couple of them and that really puts you in a bind," Peeples said. "I was out of work for a while. But I feel both ways about it. They renew your loan and renew your loan, but sometimes what else do you do?"

Return customers, trapped in a cycle of debt - like the ones Peeples said she saw as an employee - was one of the driving factors in the bill's passage, legislators say.

"People were getting into the cycle so deep that they were taking out new loans to pay off last week's loans. It was a cycle out of control," said Tim Schaffer, R-Lancaster, who voted in favor of the bill.

Columbus lawyer David Paragas is representing the Washington-based Community Financial Services Association in its fight against the bill signed June 2 by the governor. If state elections and legal officials decide a petition is in order, backers would need to get signatures from 241,366 voters by Sept. 1 to put the issue on the ballot.

Under the new law, payday lenders are limited to charging 28 percent interest on all payday advances, and are prevented from granting more than four loans to a customer annually.

Supporters of the legislation say it is one of the strongest consumer-oriented payday laws in the country and will prevent borrowers from paying high interest rates - some of which have been as high as 300 percent.

Critics, including the financial services association, say it forecasts doom for the industry, and could eliminate some 6,000 jobs across the state, as well as cut a service that is vital for its customers.

A spokesman for Community Financial Services of America was not available for comment, but issued a a statement in response to the new law.

"It's a sad day when the opinion writers and so-called consumer groups count for more than the opinions of the people responsible for putting lawmakers in office," the group said in a news release.

The group charges politicians in Ohio now will "have to answer to the millions of citizens who will be left without a regulated, short-term loan option and the employees left without jobs and healthier benefits."

Schaffer said he understood some of the concerns brought forth by the bill's opponents and proposed an amendment, which was adopted, allowing payday lenders to opt out of the new regulations if they follow the guidelines of Ohio's Small Loan Act.

"If any business wants to operate fairly and legitimately in Ohio, the door's open," Schaffer said.

"But I don't think businesses that suck families into the cycle of debt are welcome."