Payday Lending

Pending Actions 2009

On November 4, 2008, the Ohio voters voted by a margin of 64% to 36% to retain legislation that reforms payday lending (Issue 5). Since this passage many payday lenders have restructured their practices, finding ways to charge clients about the same, or in some cases, even more, in fees and interest rates.

HB 209 has been introduced to remove the provisions that allow for exorbitant fees. Issue 5 Enforcement Act

Background/Action Alert on HB 209, Ohio Coalition for Responsible Lending

Background on Payday Lending in Ohio

On June 2, 2008 the Governor signed into law HB 545. H.B. 545 was a result of 12 months of legislative debate regarding how best to reform Ohio’s payday lending law. Among other things, H.B. 545 places a 28% APR (annual percentage rate) cap on small loans; reduces to $500 the amount that can be loaned; restricts borrowers to four loans per year; limits them to one loan at a time; allows them 30 days to repay the loan and prohibits internet lending.

Section 3 of this bill eliminated the existing payday lending provisions in favor of a more regulated and limited small loan program. Payday lenders are seeking to repeal this section of the new bill in order to allow pre-HB545 practices to continue.

In pre-HB 545 practices, a payday loan borrower writes a check (up to $800) typically dated for two weeks later. The money is advanced for a fee ($15 per $100 borrowed). If the borrower is unable to pay back this loan within the two weeks, interest (5% per month on the unpaid principal) and collection fees are assessed.  When fees and charges are converted to the federally required annual percentage rate (APR), they amount to 391%.

Concerns have been raised as to whether there are sufficient safeguards and legal protections to mitigate against low income persons becoming trapped in a debt cycle of repeat borrowing and high borrowing fees.

The Community Financial Services Association of America, an association of payday lenders, believe they are striving to be responsible lenders. Best Practices Pledge.

The Center For Responsible Lending, a nonprofit, nonpartisan research and policy organization, believes too many practices result in keeping borrowers in debt.

In Ohio, the Ohio Coalition for Responsible Lending, a growing coalition of concerned individuals, civic representatives, faith communities, low income advocacy organizations, and legal associates has formed to help assure responsible practices and legal protections within this type of lending.

Catholic Conference of Ohio's Position on Payday Lending Reform

On June 27, 2007 the Ohio Bishops went on record as supporting initiatives that protect the working poor and all Ohio consumers from the spiraling indebtedness caused by payday lending, and directed the Catholic Conference of Ohio’s Department on Social Concerns to study and recommend ways our church communities can help in the promotion of alternative lending programs, such as credit unions and small loans, as well as the creation and promotion of financial awareness education programs.

The Catholic Conference of Ohio supports reform of Ohio’s payday lending practices.  We support lending models that provide fair and helpful loans for persons in need.  It has come to our attention that the growing number of payday cash-advance programs in our state may be doing more harm than good for persons in need of short-term cash loans.

In the teachings of our faith we have many warnings about usury and exploitation of people.  Lending practices that, intentionally or unintentionally, take unfair advantage of one’s desperate circumstances are unjust. Catholic Social Teaching demands respect for the dignity of persons, preferential concern for the poor and vulnerable, and the pursuit of the common good.  These principles coupled with our teaching on economic justice animate our questioning of current payday lending practices.

Catholic Teaching on Usury

Usury is a scourge that is also a reality in our time and that has a stranglehold on many peoples' lives. Although the quest for equitable profit is acceptable in economic and financial activity, recourse to usury is to be morally condemned. Those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them. This condemnation extends also to international economic relations, especially with regard to the situation in less advanced countries, which must never be made to suffer “abusive if not usurious financial systems.
Compendium of the Social Doctrine of the Church, Paragraph 341.

Compendium of the Social Doctrine of the Church. Chapter Seven, Economic Life. Pontifical Council for Peace and Justice, 2005.

Catechism of the Catholic Church. Seventh Commandment, You Shall Not Steal.

Educational Resources

Catholic Conference of Ohio Reflection Statement urging a yes vote on Issue 5. September 2008

Catholic Conference of Ohio's Statement of Concerns regarding Payday Lending, February 2008

Catholic Conference of Ohio Sign-On Statement of Concern, February 2008

Catholic Conference of Ohio Background Report on Payday Lending, June 27, 2007

Need More Information

Contact Jim Tobin 614-224-7147