Issue 5 (Payday Loans) is apparently MUCH more extensive than you may have realized

And by "you" I mean "me." I might well have been wrong yesterday when I said that the passage or defeat of Issue 5 was irrelevant to the creation of a statewide database of payday loans, and therefore voting "no" would do nothing to protect Ohioans' privacy.

The explanation that I got from a source who's more conversant with the issue than myself simply blew my mind, and I've had to backtrack and check for myself...

Back in July, when the Payday Lenders couldn't come up with satisfactory petition language for a referendum that would repeal all of HB545, they decided on going for a partial repeal:

...Rogers accepted language that would repeal only Section 3 of the bill — the section that eliminates the current law as it relates to the loan amount and interest rate charged by payday lenders.

Specifically, Section 3 repeals ORC 1315.35-1315.44*, and the language you will see on the ballot is as follows:

REFERENDUM ON LEGISLATION MAKING CHANGES TO CHECK CASHING LENDING, SOMETIMES KNOWN AS “PAYDAY LENDING,” FEES, INTEREST RATES AND PRACTICES

Substitute House Bill 545 (H.B. 545), which was passed by the Ohio legislature and signed into law by the Governor, substantially changed the law regulating how certain lenders in Ohio operate. Under the referendum, voters must decide whether Section 3 of H.B. 545 should go into effect. Section 3 of H.B. 545 deletes the old provisions of the law regulating check cashing lenders, sometimes known as “payday lenders,” in favor of the new provisions.

1. If a majority of Ohio voters approve Section 3 of H.B. 545, all short term lenders, including check cashing lenders, would be subject to the following limitations:

• The maximum loan amount would be $500;
• Borrowers would have at least 30 days to repay the loan; and
• The maximum interest rate would be 28% annual percentage rate (APR) on all loans.

2. If a majority of Ohio voters reject Section 3 of H.B. 545, check cashing lenders
would be allowed to continue under previous law as follows:

• The maximum loan amount would continue to be $800;
• There would continue to be no minimum repayment period; and
• Check cashing lenders could continue to charge rates and fees, resulting in atotal charge for a loan that substantially exceeds an equivalent APR of 28%.

A “YES” vote means you approve of Section 3 of H.B. 545, and want to limit the interest rate for short term loans to 28% APR and change short term lending laws.

A “NO” vote means you disapprove of Section 3 of H.B. 545 and want to permit check cashing lenders to continue to be able to offer short term loans as currently permitted.

A majority “YES” vote is required for Section 3 of H.B. 545 to be approved.

SHALL SECTION 3 OF H.B. 545
BE APPROVED?

YES
NO

That had seemed clear enough to me, but things are not always as they seem. In that same July Dispatch piece quoted above, A.G. Nancy Hardin Rogers makes an additional statement:

If successful, Rogers said the partial referendum could cause legal confusion because payday lenders would be operating under two sets of laws — one that requires a 28 percent interest rate, and one that allows 391 percent.

You see, part of the statute repealed within Section 3 of HB545 defines the conditions under which a "check cashing" lender can get a license. The extensive reforms listed in Section 1 of HB545 regulate the behavior of lenders holding a "small loan" provider license.

Apparently, repealing Section 3 will allow the continued issuance and renewal of "Check Cashing" lender licenses. Under this interpretation, nobody would be regulated under HB545 unless they voluntarily applied for a "small loan" provider license instead of a "check cashing" lender license.

Therefore, Issue 5 is not just about repealing the interest rate reforms on Payday lenders, it is about effectively repealing all of the reforms. As the last line of the ballot language states, "...permit check cashing lenders to continue to be able to offer short term loans as currently permitted." The clear distinction made between "Check Cashing Lenders" and "All Short Term Lenders" in the ballot language lends pretty clear support to that interpretation. So without Section 3, Sections 1,2,4,5 might as well not exist.

Maybe I'm just way too dense. Was anybody else misled into believing that a "no" vote on Issue 5 would only affect the interest rate, maximum amount, and minimum payback period? I personally find the ballot language to be somewhat misleading and I'm kind of upset about it, although most of the blame lies with me for not noticing the "check cashing" dodge, especially in light of statements from the lenders like this:

Kim Norris, spokeswoman for the Reject HB 545 Committee, said the new proposed referendum would allow consumers to choose from old loan options as well as new ones created by the new law. Critics say it would create legal confusion and lawsuits.

To be fair, I've encountered a number of summaries that miss this as badly as I do (for example here, and here, and perhaps most importantly, HERE**), but if I've helped to spread this misunderstanding, I apologize.



* Finding these sections on the net is a bit tricky. The web version of the ORC replaces the text of those sections with the single word "Repealed." The Google Cache of ORC 1315 currently has the original text, but if you click on the link for 1315.35 (or any of the specific subsections), it will take you to the current "repealed" version. If you want to use the cached version, scroll down through 1315 instead of using the links.

** It doesn't get much more to the the point than "Guess which part the lenders want to repeal? The part that caps interest rates at 28 percent."