Payday lending in Ohio continues to be a hot topic for debate. After 87 out of 88 counties voted to create consumer protections in 2008, the industry found a loophole and continued to exploit many financially vulnerable families in our communities. Families struggling to make a car repair, fix a broken pipe, or other unexpected expenses often fall into a debt trap taking months or years to pay off one short-term loan. Ohio’s legislature (after a scandal that forced the State speaker to resign) passed new legislation in the spring of 2018 that will go into effect this year.
Under the federal Consumer Financial Protection Bureau (CFPB), new rules were being implemented to strengthen consumer protections on a national level. However, there are new efforts to repeal and revise those federal rules. We are pleased that our board member, Rev. Leonard Killings from Cleveland, OH attended a hearing with the new CFPB director, Kathy Kraninger, to share the position of the faith community against exploitative lending practices that hurt families struggling to get by .
As people of faith, scripture compels us to love our neighbor - including those struggling to make ends meet. The current CFPB rules help to protect families who seek to gain financial stability and we encourage this bureau to protect the people of the United States, including our military families, from getting caught in a debt trap.
In Ohio, we see the impact on how the CFPB rule is already working to curb the most harmful loans while allowing affordable credit to remain available. After the CFPB rule was finalized, Ohio lawmakers, with broad support from faith, business, veterans leaders and local governments, passed strong bipartisan consumer protections which complement the CFPB rule.
We need strong federal and state regulations to create a proper framework for consumers throughout Ohio and the country. Otherwise, unscrupulous lenders can attempt to avoid state laws in creative fashions, and hurt consumers and local businesses seeking to provide a fair product to the community.
The Ohio Fairness in Lending Act creates loans that will have a reasonable amount of time for repayment. Beginning this spring, with federal and state regulations in place, borrowers in Ohio will be able to borrow $400 over 3 months and pay back $109 compared to $367 under the previous regulatory system. That savings will be invested into food, fixing the car, medicine, and even school supplies for the kids. I think we all agree that the $250 can go a long way for a family struggling to make ends meet.
Short term loans are harmful and the CFPB’s 2017 rule did a good job curbing unaffordable balloon-payment loans due back in less than 45 days. The rule paves a way for banks to offer healthier loan products in low-income communities.
As an ecumenical network that works with Lutherans, Episcopalians, Congregationalists, Methodists and many others we encourage the CFPB to maintain the payday lending rules that help create options for low-income households to obtain affordable lines of credit and take control over their own financial future.