Ohio voters roundly approved a law which could mean the end of the state's payday lending industry.
Issue 5 affirms placing the annual cap on lending rates at 28 percent, whereas the previous cap has been 319 percent. The law affirmed by Ohio voters Tuesday caps the maximum loan at $500, instead of the previous high of $800.
Statewide, 64 percent of voters favored keeping the law that limits interest rates. The law was passed by the Legislature and signed by Gov. Ted Strickland earlier this year. Washington County voted overwhelmingly in favor of the law, with 19,183, or 68.8 percent, in favor, and 9,077, or 31.2 percent, against.
John Moorhead, president of Zanesville-based Urgent Cash, which has a location on Acme Street in Marietta, called the passage of the law "the end of the payday lending industry (in Ohio) as we know it."
"Let me give you the facts," he said. "It costs us $13.86 to loan $100. Under the new law, I'll be able to charge $1.07 per $100; that means losing $12.79."
He said the $13.86 comes from the cost of doing business, meaning rent, utilities, insurance and labor costs.
According to Darryl Dever, a Columbus businessman and lobbyist for Ohio's payday lenders, the law could cost the state nearly 6,000 jobs, which was the theme of the election campaign against Issue 5.
He said the 319 percent annual interest rate is a misleading figure and the average loan actually is a two-week transaction with 15 percent interest.
Dennis Harrington, an attorney with Southeastern Ohio Legal Services in Ohio and a vocal opponent of payday lending, said he could not be happier with the voters' decision.
"There comes a time to say 'enough is enough,'" he said. "The interest rate they are charging is just ridiculous. The industry says that no individual actually pays that much, but if you look at the returns on that money, it's predatory."
Harrington said the Marietta branch of Southeastern Ohio Legal Services deals with 15 to 20 cases of people in the payday lending cycle every year.
Washington County has 19 payday lender storefronts, down two from the number operating in 2006. The county is second in the state with 3.25 lenders per 10,000 residents.
Linda Cook, a senior staff attorney at Ohio State Legal Services and a former member of the Ohio Coalition for Responsible Lending, said payday lending shops that diversify should be able to stay in business.
"It's the monolithic shops that only offer payday lending that are in trouble," she said. "The industry spent between $15 million and $18 million in the campaign (against Issue 5); that gives you an idea of how profitable it was."
Cook said there are no numbers on how many cases Ohio State Legal Services deals with involving payday lending, but the payday loans are often parts of other cases.
"There are people who can't pay their mortgage or can't make their car payments," she said. "People were paying these loans and not paying other loans."
Cook said in regard to job losses, payday lending employees have historically had very high job turnover.
"These are not very secure jobs," she said. "It's never great to lose jobs, but it's preferable to have jobs that add some value to the community."
Mary Jackson, senior vice president of government relations for Texas-based Cash America, said her company will try to continue doing business in Ohio by offering short-term loans and pawn loans, which require some kind of collateral by the person taking out the loan.
Both of these, she said, have a very low interest rate, but Ohio law allows the company to charge a small fee.
"Because of the lower pricing on the credit, we won't be as generous with the underwriting criteria," Jackson said. "People who would typically qualify for (a payday loan) might not qualify for these other types of loans."
She said 43 of the 139 Cash America stores in Ohio will be closing, but it has not been determined which stores which will remain open.
Kelly Moore, a Marietta resident, said she has used payday loans for a variety of reasons, including getting needed money when she had to replace a flat tire and was still days away from her next paycheck.
"Should it not be our right to choose our lender?" she said. "I think Ohioans are smart enough to make their own financial decisions."
Washington County Commissioner Sam Cook said the industry takes advantage of Ohioans.
"It's basically legalized loan-sharking," he said.
