A bill that capped the annual percentage rate on short-term payday loans at 28 percent was signed by Ohio Governor Ted Strickland earlier this past year. However, Rep. Bob Hagan stated recently that he is "embarrassed that the storefronts continue to operate throughout Ohio."
Hagan sponsored a bill last year that would have put a 36 percent cap on payday loan rates. As stated above, a different bill was passed that makes the cap even lower. Apparently, Ohio payday loan companies have now obtained licenses under two other code setions-the Small Loan Act and the Mortgage Loan Act. Hagan said, "They (the payday loan companies) seem to have won on legal terms." It seems interesting that he is trying to condemn the industry for legally keeping higher rates.
He later went on to say, "It's embarrassing, it's wrong and the people of the state of Ohio have said as loud as they could that they didn't want this type of payday lending industry to operate in the state of Ohio." That statement seems a bit contradictory on several levels.
First of all, if the citizens have "said as loud as they could" that they don't want payday loan companies, then how are the companies staying in business? Could it be that the Ohio citizens are still using that resource? A lot of individuals responsibly use the payday loan service with no negative experiences or problems.
The second thing Hagan indicated in this statement is that he doesn't seem to want to just cap the rates, he wants the whole industry to leave the state. Apparently he realizes that a 28 percent rate cap would ultimately put the industry out of business.
Putting payday loan companies out of business would not solve borrower's problems of needing a loan. They would have to get a loan from a different source, and some may not be able to reach the higher qualifications of a bank loan. Payday loans help consumers who need a quick and convenient loan. Taking that service away would only cause more hardships for Ohio citizens that need a short-term loan option.