Innis told Senators that payday loan bans in other states have
been feel-good measures that hurt consumers. "Various members of
my organization in Georgia have noted the booming illegal and
dangerous loan shark activity. Contrary to helping consumers,
these de facto bans of payday lending have given vivid meaning
and context to the proverb, the road to hell is paved with good
intentions."
Innis continued, "It seems unfortunate to me that the people of
Ohio are in danger of losing the choice of a viable financial
tool. A tool, which when lost in other states such as Georgia
and North Carolina, has hurt consumers."
For months the Ohio legislature has been grappling with how to
regulate the payday lending industry. Back in February there
were three different bills in House. Two of them would have put
an end to the industry by creating a cap on loan interest rates.
Innis supported the third bill (HB 337) because it would have
created a financial literacy education fund to be used to
support various adult financial literacy education programs,
required check-cashing loan businesses to comply with the "Fair
Debt Collection Practices Act" and created an optional extended
payment plan for borrowers who are unable to pay their loan on
its due date.
See full text of Innis' January testimony supporting HB337 below.
All three of those bills are now dead. The current legislation
being considered by the Senate is HB545, which like two of the
previously considered bills, would have a 28% cap on interest
charged on a payday loan. This cap will effectively shut the
industry down, affecting jobs and a needed service.
"I've been in conversation and consultation with many OH
legislators for several months up to this very morning. These
legislators come from communities that are underserved by
traditional lenders and many of them recognize the dire need for
the very services this industry provides. Many of them, as do I,
believe in reasonable regulation, but not regulation that
regulates this choice away from their constituents," Innis
stated before OH Attorney General Marc Dann during a public
hearing in Columbus on April 9, 2008.
According to a recent staff report of the Federal Reserve Bank
of NY, since the effective ban of payday loans in North Carolina
in 2004 and Georgia in 2005, bounced check fees, complaints
against other debt collectors and even personal bankruptcies
have dramatically increased.
Innis concluded his testimony with the following observation -
"It seems bitterly ironic that this viable financial tool is
threatened to be taken away from the citizens of Ohio, while
simultaneous efforts are being made to expand gambling. There is
something morally troubling and inconsistent with the hypothesis
that says the activity of a single mom getting a $200.00 dollar
payday loan to buy gas to get to work should be banned, while
that ability of that same mom to gamble that same $200.00
dollars on Keno or in a new casino should be made readily
available."
In stark contrast to Innis' reality-check, disgraced Ohio
Attorney General Marc Dann sent his endorsement of the proposed
ban to the Senate today.
See full report of Ohio AG Marc Dann here. In the 22 page
report's cover letter, Dann, who is under threat of impeachment
after admitting last week to an affair with a subordinate and
fostering an office atmosphere rampant with sexual harassment,
calls the payday lending industry predatory.
Testimony of CORE Spokesperson Niger Innis Before the Ohio
House Financial Institutions, Real Estate & Securities
Committee
January 31, 2008
Mr. Chairman and members of the Committee, my name is
Niger Innis. I am the National Spokesperson for the Congress
of Racial Equality also known as CORE. CORE was founded in
1942 and it is the third largest of the civil rights
organizations in the United States. For over 60 years, CORE
has championed self determination and equal opportunity for
all people. I am pleased to be here today to address this
committee, because we, like you, are working to find real
solutions to the most difficult problems facing working
families in our communities.
As part of our commitment to improving the lives of
working families, CORE has looked into the payday loan
issue. We've researched the payday lending industry, its
products and its customers. We have found that, as in all
industries, there are a variety of actors. And in the Payday
lending industry there are many good actors. They are both
responsible and they deliver a product that is wanted and
needed in our communities. Payday lenders offer a choice
that is not widely provided by traditional lenders anymore.
Consequently, we think that payday lenders provide a choice
that members of our communities should be allowed to make.
Mr. Chairman and members of the committee; I would like
to address my remarks to and in support of House Bill 337.
Financial Literacy. House Bill 337 Creates a financial
literacy education fund to be used to support various adult
financial literacy education programs, that will be funded
by a five per cent (5%) assessment of the financial
institution fund.
CORE is a long time supporter of financial literacy. We
believe that people should be able to make their own
financial decisions and that they are best able to do that
when they are educated and given accurate information. It is
for these reasons, that in 2005 CORE initiated its Financial
Literacy Choice and Awareness Campaign (FLCA) to educate the
public about various financial choices as well as the
opportunities and pitfalls associated with those choices.
We have talked to and engaged various members of the
payday loan industry and other financial service providers,
across the country, about its commitment to financial
literacy. This goal of HB 337 is admirable and, on behalf of
CORE, we support this legislation and the efforts you've
made to bring this to fruition
However, Mr. Chairman one respectful suggestion I would
strongly recommend and urge; it seems to me that all types
of financial service providers should be encouraged to do
their part to fund financial literacy efforts in the state.
Financial literacy and awareness is the next frontier for
the civil rights movement and we should all do our share to
further that goal.
Other aspects of HB 337 that we are fully in support of
are;
The Prohibitions against check-cashing loan programs in
Ohio conducted through the mail or through the internet,
drafting funds electronically from any depository financial
institution or from billing any credit card issued by a
financial institution for any loan or extension of credit (
is made pursuant to an agreement for deferred deposit of any
check including any deferred electronic draft) without the
business first having obtained a check-cashing loan license
from the superintendent.
Requirement of check-cashing loan businesses to comply
with the "Fair Debt Collection Practices Act", when
collecting money owed under a loan contract and the
collection Limit of the permitted check collection charge to
no more than one time on the same check; and finally
prohibiting licensees from bringing or threatening to bring
criminal action against a borrower for failure to comply
with the terms of a loan contract.
The creation of an optional extended payment plan for
borrowers who are unable to pay their loan on its due date.
A licensee shall offer to each borrower at least one
extended payment plan per calendar year. It allows the
borrower to repay the loan in four equal payments with the
first payment being due on the date the borrower enters into
the plan and the other three payments due on the borrower's
scheduled periodic pay date. No additional interest, fees or
charges may be applied to loans that go into the extended
payment plan. Furthermore, that a check-cashing loan
business is required to post a sign that informs potential
borrowers of the extended payment plan option.
This extended payment plan option is exactly the vehicle
that people in my community could use to prevent the
potential cycle of debt, while exercising a financial option
made available with access to this product.
In closing, I would like to extend my congratulations to
this committee for its reasoned work on this important
issue. I understand that there has been a great deal of
sensationalism and media hype about this issue in recent
recently. I want to commend you for keeping cool heads and
for endeavoring to do what is right for all of the citizens
of Ohio. It is easy to fall into step with political
correctness. But it takes character to do as you have done
by considering what is best for the vast majority of
consumers – not just the noisy few.
There is
something morally troubling and inconsistent with the hypothesis
that says the activity of a single mom getting a $200.00 dollar
payday loan to buy gas to get to work should be banned, while
that ability of that same mom to gamble that same $200.00
dollars on Keno or in a new casino should be made readily
available.
