Almost every day at the Dann Law Firm we hear from clients who have been victimized by some form or payday lender or short term lender in somewhere in Ohio charging often desperate consumers upwards of 300% interest on loans that often compound to thousands of dollars. This is particularly disturbing to me because as a member of the Ohio Senate and as Attorney General I worked very hard to persuade the legislature to pass comprehensive legislation to regulate payday lenders and in 2008 the Ohio General Assembly pretended to do so.
In 2007 Nadine Ballard, the Chief of the Ohio Attorney General’s Consumer Protection Division and I convened hearings throughout the state of Ohio about the devastation that these truly predatory lenders were causing to the lives thousands of working class and poor Ohioans. We used a statutory provision that hadn’t been used in several decades that allowed us to use the power of subpoena and to take testimony under oath from victims of payday lenders and the industry. We held hearings in Cleveland, Columbus and Cincinnati and complied our findings into this comprehensive report to the Ohio General Assembly. Sadly, every practice identified in this report 7 years ago continues to take place today.
Shortly after we issued our report, the Ohio Legislature passed what it called comprehensive reform of Payday Lending, making substantial amendments to Ohio’s Short Term Loan Act. What they failed to do was make similar changes to other lender laws like the Mortgage Loan Act. Predatory Payday Lenders simply switched their registration with the Ohio Department of Commerce and continued to gouge consumers.
Yesterday, the Ohio Supreme Court yesterday decided that it appears that was exactly what the Ohio legislature intended. Justice Paul Pfeifer asked the right questions in his dissent:
“I write separately because
something about the case doesn’t seem right.
There was great angst in the air. Payday lending was a scourge. It
had to be eliminated or at least controlled. So the General Assembly enacted a
bill, the Short-Term Lender Act (“STLA”), R.C. 1321.35 to 1321.48, to regulate
short-term, or payday, loans. And then a funny thing happened: nothing.
It was as if the STLA did not exist. Not a single lender in Ohio is subject to the law.
How is this possible? How can the General Assembly set out to regulate a
controversial industry and achieve absolutely nothing? Were the lobbyists
smarter than the legislators? Did the legislative leaders realize that the bill was
smoke and mirrors and would accomplish nothing?”
While we continue to try to find ways to attack these loans in state court and in bankruptcy court on behalf of our clients, the Ohio Legislature needs to find a way to stand up to the strong lobby for the payday lenders and enact reasonable protection for consumers, limiting interest rates for all short term loans, limiting the number of loans that can be issued and clamping down on abusive collection practices.