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Texas firm favored in pawn-loan provision added to Ohio budget

ohio payday loan legislation

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By Jim Siegel The Columbus Dispatch • Monday May 11, 2015 2:39 AM

Dispatch file photo The provision added to the state budget by House Republicans would create a separate pawnbroker license that would allow larger companies to charge higher rates. Request to buy this photo ' class=''> Enlarge Image Request to buy this photo Dispatch file photo The provision added to the state budget by House Republicans would create a separate pawnbroker license that would allow larger companies to charge higher rates.

As Cash America shifts away from payday lending and back toward its pawnbroker roots, the company wants Ohio to let it charge higher interest rates for making pawn loans.

After failing to get legislation passed during the past four years, the Texas-based company, which employs 11 lobbyists in Ohio, persuaded House Republicans to insert the provision into the new two-year budget, which has drawn fire from pawnshops, law enforcement and consumer advocates.

The provision, one of hundreds of changes the House made to the two-year, $71.5 billion budget before passing it last month, creates a separate pawnbroker license that would allow larger companies to charge higher rates.

The Center for Responsible Lending, a national consumer-advocacy group, said the provision would allow a pawnshop to charge $45.50 interest on a $350 loan for 30 days, more than double the current $21.50.

“It’s simply adding to a long list of predatory loan products that currently exist in Ohio,” said Diane Standaert, director of state policy for the center.

Facing stricter state and federal regulations on payday lending — short-term, high-interest loans that often leave customers repeatedly taking out new loans to pay off old ones — Cash America wants to move to pawn loans but says it needs a higher interest rate to be profitable in Ohio. The company, which has 120 stores and employs 840 people in Ohio, plans to move its payday operations to an online affiliate.

The company could “limp along” under Ohio’s current rates, but “they won’t embrace the state because they can’t make a good enough return to justify an expansion,” said Jeff Jacobson, a lobbyist for Cash America.

“In Ohio, we have had traditionally low rates of return, so you make your money by basically hoping people don’t show up and low-balling them on what you gave them for their item,” Jacobson said. “If the rates are too low, nobody will compete except for

those whose model is to cheat you out of grandma’s diamond ring.”

Cash America wants to be a lender, Jacobson said, offering customers more for their items but also charging higher rates. He argues the Ohio Pawnbrokers Association is opposing it only because “ they don’t like competition.”

Bob Lambert, lobbyist for the Pawnbrokers Association, said unfairness, not competition, is driving its opposition. Pawnbrokers think the law should be left alone.

“It creates an uneven playing field where a larger company can make a lot more money than the people who have been here serving the communities,” Lambert said.

“You’re not taking care of your home-grown Ohio businesses. You’re taking care of this national corporation. Their business model thrives off high-interest rates and fees.”

Bill Faith, executive director of the Ohio Coalition for Homelessness and Housing in Ohio, a leading critic of payday lenders, was surprised to see the issue get in the budget after it had drawn opposition in past sessions.

“They’ve been busy behind the scenes,” he said. “It was over before we even knew it was in there.”

Faith said he does not have the same concerns about pawnshop loans as he does with payday lending. While pawn loans are expensive, he said, they don’t lead to a debt spiral because if a loan is not paid off, it ends and the person loses the item he put up as collateral.

Still, Faith said, it doesn’t make sense to establish different pawnbroker-licensing standards.

“What I don’t like is it sets up a scenario where a player is charging so much more, so isn’t everybody going to go to that?” he said. “The message from this legislation is: Go and charge more. We are going to give you an option to allow you to gouge consumers even more.”

The Ohio Department of Commerce has asked senators to pull the provision out of the budget and debate it as a separate bill.

The amendment got into the budget at the request of Rep. Bob Hackett, R-London, who said it also includes new reporting requirements that will “modernize the system” by allowing quicker tracking if a stolen item is sold to a pawnshop.

But John Gilchrist, legislative counsel for the Ohio Association of Chiefs of Police, said the proposal will make it more difficult for a crime victim to recover stolen property by forcing them to go through more hoops.

“The ‘license plus’ pawnshops will be allowed to be even less friendly to crime victims and consumers, and will make the work of law enforcement more difficult,” Gilchrist said.

Category: Payday loans

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