State Representative Jay Hottinger

 







The Ohio economy has had a rough time these last several years as transportation and information improvements have contributed to a more global economy. Some contributing factors, like low labor costs in developing countries, are difficult to work around. Others, like state taxes and predatory lending are more easily affected. More immediate problems include the heavy debt load that many Ohio families carry and the devastating effect that can have on their lives. Today this debt load includes a national debt of $124,000 for a family of four and a consumer debt level of $8,300 per person. Debt threatens many families not just with possible foreclosure on their home, but also drains resources from their daily lives and decreases their financial security in their later years.

House Bill (HB) 545 was recently passed by the Ohio House of Representatives to protect consumers who have found themselves in a cycle of debt due to over reliance on payday loans. By itself a payday loan can serve an important function. However, what has been found is that those who utilize payday loans frequently rely on them many times a year and often take out a payday loan to pay back a previous payday loan, trapping them in a cycle of debt. HB 545 addresses this is in several ways. First of all, borrowers would be limited to 4 payday loans a year. Secondly an up-to-date database will be developed to track loans to make sure that someone does not have more than two loans out at one time for a maximum amount of $500 or 25% of their monthly income, whichever is less. HB 545 will also limit the interest rate that can be charged to 28% and will not allow a lender to charge a loan origination fee. While the current payday loan interest rate is capped at 5%, when that is coupled with the loan origination fee for a two-week loan the annual percentage rate is actually 391%. Borrowers who take out more than two loans within a 90 day period would also be required to attend a financial literacy course.

Access to money is a necessity, but easy access, coupled with high interest rates and fees, has made payday lending both a blessing and a curse. As House Bill 545 heads to the Ohio Senate for further consideration my hope is that this bill will curb a product that has trapped Ohioans in a cycle of debt and drained so many financial resources from the Ohio families that it is supposed to help.

As always, I welcome your questions, comments and input on state government issues. Please feel free to contact me by mail (State Representative Jay Hottinger, 71st House District, 77 South High Street, Columbus, Ohio 43215), by email (district71@ohr.state.oh.us) or by phone (614-466-1482).