ELYRIA — Lorain County isn’t doing as bad as some counties when it comes to residents caught in the cycle of payday lending and high interest rates, according to a study released Wednesday by the Ohio Coalition for Responsible Lending.
According to the study, 6,150 county residents were unable to pay off loans they took from payday lenders and often were forced to take out additional loans to cover the interest rates.
Paul Bellamy, special counsel for the Equal Justice Foundation, which is part of the Coalition, said that works out to about one payday borrower for every 46.3 county residents, which is actually better than the statewide average of one borrower for every 35.6 residents.
“It’s not the best, but it’s better than most,” Bellamy said.
Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, said payday lending is a huge problem throughout the state.
“The average customer gets 12.6 loans per year, so that means for about half the year, they’re in debt to a payday lender,” Faith said.
The Coalition for Responsible Lending is backing a bill sponsored by state Rep. William Batchelder, R-Medina, which will limit the interest rates lenders can charge to 36 percent. Currently, rates can run as high as 391 percent a year for those who fail to make payments on time, critics have said.
Payday lenders have said a cap would kill the industry in Ohio, but Faith said the industry must stop its current practices.
“They could either change their business model or not operate in the state,” Faith said.
State Rep. Matt Lundy, D-Elyria, is sponsoring another bill that will give borrowers more time to repay their loans, limit late fees and encourage financial responsibility on the part of consumers. Initially, Lundy and Batchelder were working together but chose separate paths to address the problem.
But Tom Allio, director of the Diocesan Social Action Office in Cleveland, which also is part of the Coalition, said Lundy’s bill was the designed with the lenders in mind.
Lundy said he has met with the lenders, but he believes that although the industry needs to be reformed, payday lenders perform an important role by offering loans to those who might not otherwise qualify for them because of bad credit or low income.
His bill does not include a cap, he said, because it would destroy the industry and probably wouldn’t win the support of enough of his fellow legislators to become law.
“I’m just trying to be realistic instead of idealistic,” Lundy said.
Contact Brad Dicken at 329-7147 or firstname.lastname@example.org.