Bill targets high payday lending rates
When someone needs a little extra cash before payday they'll often hit up a payday lender, but the interest rates can end up costing an arm and a leg. A new bipartisan effort at the Statehouse would aim to make the rates more affordable.
Researchers with the Pew Charitable Trust found Ohio has the highest interest rates in the country. People taking out a small loan can end up paying three times what they originally borrowed after all the fees.
"They're really convenient if I don't have enough money to get to the next payday or my car breaks down and I don't have the money," said Corinthia Foster from West Columbus. "I usually go and get a loan."
She said last year she borrowed $300. She paid monthly payments of $58 a month for a year so she ended up paying a total of $696.
"I pay it back but I don't want to do it again," she said. "It makes me want to rip out my hair because the interest rate is so high."
The bill sponsored by Representatives Kyle Koehler (R-Springfield) and Mike Ashford (D-Toledo) would limit monthly payments to five percent of someone's gross monthly income. It would also cap the yearly interest rate to 28 percent. Some payday lenders can charge up to 596 percent.
"We want to make work pay," said Joel Potts with the Ohio Job and Family Services Directors Association. "We want to help individuals move from welfare to work. We're not saying we want to shut them down, in fact we think they provide a very valuable service. They do help people may otherwise fall through the cracks but at the same time we want it to be more fair and more reasonable."
Foster said the bill would help her get ahead if it became law.
"If it wasn't so strenuous and the interest rate wasn't so high it'd be a lot easier to get by," Foster said.
The Franklin County Veterans Service Commission said they see between 20 and 25 vets a month who struggle to pay off payday loans. They said some take out more loans to pay off the older ones.
The bill was introduced in the Statehouse earlier this week but so far hasn't taken the next step of being assigned to a committee.