This is the last week of legislative work before lawmakers go on their summer break until after the November General Election.
Pushing hard to get payday lending reformed, the Senate Finance Committee is entertaining testimony Monday, Tuesday, and possibly Wednesday with votes on amendments and potentially on the Senate floor planned.
The committee has not had the bill for very long and the rush to get it done is reminiscent of the push to get congressional redistricting done earlier this year.
Similarly, lawmakers are in the same position where if they do nothing or in this case too much, citizens are prepared to pursue a ballot initiative to make the changes for them.
The bill being worked on is House Bill 123, the payday lending reform bill introduced under bipartisan joint sponsorship by State Reps. Koehler and Ashford.
The bill is modeled after a similar law in Colorado, it is not identical. The Ohio bill is more flexible and allows lenders to begin earning money on the loan right away while the Colorado bill forces them to wait 60 days.
The bill has had a controversial lifespan in this General Assembly. It languished for months under former Speaker of the House Cliff Rosenberger’s leadership until late in 2017 when the public outcry forced lawmakers to do something.
After Rosenberger’s resignation, there were questions if the bill would survive or if the House Republicans wanted to be associated with it at all due to the topic being tied to the former speaker and an investigation into his activities.
Ultimately, amendments for the bill were tabled and the bill was passed as introduced and shipped off to the Senate to deal with.
That was about three weeks ago.
Last week the bill had its first two hearings. During the second of hearing Senators first began learning about a plan State Sen. Matt Huffman was putting together.
In his presentation, he explained that his plan calls for three areas to be addressed: strengthening consumer protections, tightening lender requirements, and enhancing loan safeguards.
In terms of strengthening consumer protections, Huffman wants to have the lenders verbally inform the borrower that they may have other options available, and he says he will close the credit service organization loophole allowing them to operate today unchecked.
He also wants borrowers to be able to cancel a loan if they find they it is too burdensome. He told the lawmakers, the borrower would not have to pay any more fees or interest and only be responsible for the principal of the loan; but they would also have to take a financial literacy course if they did this.
This is called exit ramping or hitting a pause button and has been tried in other states like Michigan and Florida without much success according to the Pew Charitable Trust researchers.
Researchers say many borrowers don’t take the options because they are discouraged by lenders from doing so with veiled threats of losing out on receiving futures loans if they take the option.
When it comes to tightening lender requirements, he wants lenders to pay for that financial literacy program and a database of who has taken the course.
Huffman also proposed another database for enhancing loan safeguards. That database would track who has borrowed when they did so and for how much.
That’s would be important information to track because his plan sets a maximum amount of principal loaned to one person at any time at $2,500 with an unlimited number of loans to reach that point.
Lender fees would be used to pay for this database, according to Huffman’s presentation. He also wants to allow anyone, not just the borrower, to pay off a loan and to be able to do so early if they want.
Finally, his plan will not allow interest only or balloon payments where the borrower could have low monthly payments with one large payment at the end of the term.
While all of that may sound reasonable the Pew Charitable Trusts, whose mission is to serve the public interest, had to say about these proposals.
“Those ideas have failed in other states,” said Alex Horowitz. “Payday lenders have recommended those ideas before to provide the illusion of reform when there’s been a demand from citizens of a state to reign in very high-cost lending that is harming families.”
The citizens who have been pushing for this reform are livid over the changes Huffman presented and they have vowed to pursue a ballot initiative if lawmakers change the bill significantly.
The Pew Charitable Trusts researchers provided the following examples as a result of their analysis of HB 123 as it originally was introduced and what Huffman presented to lawmakers.
When researchers did the math they found that taking a $500 loan out for six months under HB 123 results in the borrower paying back at most $750; under Huffman’s presented ideas, that same $500 loan results in repayment of $1,135.
If the amount goes up to $2,500, Huffman’s presented ideas result in repayment of $13,621 over 18 months.
The Senate Finance Committee could vote on adopting Huffman’s amendments as early as Tuesday. If they can’t get it done Tuesday, an “if needed” committee hearing has been set for Wednesday before the Senate holds their session.
It is currently Monday evening, and so far no one has seen the official final language of the amendments and it is likely that lawmakers will be given a relatively short amount of time to go over Huffman’s amendments before being asked to vote on them.
If they pass the committee and if it gets out of the Senate, an amended bill would then have to return to the House for a concurrence vote.
Because both chambers of the legislature are meeting Wednesday and the Senate appears to be in a rush to get this done quickly, it is likely that if it passes the Senate the House would take it up immediately.
It is unclear if the amendments to the bill will fly in the House where Democrats made up a large chunk of the supporting vote to get the bill passed in the first place.
If a Huffman amended bill is not concurred to by the House it may be assigned to a conference committee to work out a compromise.