On June 24, 2014 Senator Bill Seitz introduced Senate Bill 349, which purpose is described by the Legislative Services Commission as “to make permissive actual damages and attorney’s fees, to limit certain punitive damages, to allow respondents to recover attorney’s fees in certain instances, to prohibit actual or punitive damages from being awarded to a fair housing agency, and to exempt certain landlords from the housing provisions of the Ohio Civil Rights Law.” This bill, if enacted, will greatly weaken the Ohio Civil Rights Commission’s (OCRC) enforcement of Ohio’s fair housing (housing discrimination) laws and the remedies available to victims of housing discrimination. The ability of the respondents (landlords) to recover damages from tenants and homebuyers after any OCRC “no probable cause” finding or OCRC hearing would also have a chilling effect on filing housing discrimination charges with the OCRC.
The Ohio Poverty Law Center has joined with a coalition of legal aids and fair housing advocates to oppose this damaging bill. This coalition has created a Brief History of Ohio Fair Housing and Talking Points to assist the coalition, inform the media and the public, and help others who wish to add their voices to the opposition. To summarize, Ohio was one of the first states to enact fair housing legislation, and over the years has broadened the categories of persons protected by this law, most recently adding “military status” as a protected class. The OCRC administrative complaint process allows complaints to be filed and pursued without the burden of the costs of a lawsuit that might be filed in state or federal court. Among other things, this bill undermines this cost effective dispute resolution option and forces victims into costly court litigation. It discourages victims from attempting to vindicate their rights by making them potentially liable for the attorneys fees of those who discriminate.
The Brief History and Talking Points can be accessed here.
Also, for more information, contact Senior Attorney Mike Smalz at firstname.lastname@example.org.
In a previous post, I suggested that the Ohio Supreme Court may or may not decide the future of payday lending in Ohio. On Thursday, June 12, the Court did issue a decision. Unfortunately for Ohio consumers and voters, the Court validated the current industry business model, deciding that these short term, small dollar predatory loans can be made under statutes that were never designed or intended to regulate payday loans.
So now we move on. Today, Senator Sherrod Brown came to the Ohio Poverty Law Center and held a press conference. His remarks focused on abuses in the industry, and called upon the Consumer Financial Protection Bureau to pass strong regulations to rein in industry abuses. I was invited to participate in that press conference, and what follows are the remarks I prepared for that press conference. Where we go from here is back to the Ohio legislature, and forward to urge and support the CFPB as they begin the process of enacting regulations.
Payday and Small Dollar Lending
My name is Linda Cook, and I am a senior attorney with the Ohio Poverty Law Center. The Ohio Poverty Law Center is a nonprofit law office that pursues statewide policy and systemic advocacy to expand, protect, and enforce the legal rights of low-income Ohioans.
I, and many other consumer advocates around the state, for years have waged a campaign, first in the legislature, and then in the courts, to rein in the abusive practices of the small dollar lending industry in Ohio. When I joined the campaign in 2006, we targeted the short term loans commonly called payday loans because that was the most common short term loan product trapping Ohio borrowers in a cycle of debt. After the passage of reform legislation in 2008, the industry immediately migrated to other loan licensing statutes that pre-dated payday lending and continued offering the same predatory loans. Legal aid lawyers looked to the court system to interpret Ohio’s small loan lending statutes and to confirm the intent of the legislature and the will of Ohio’s voters to regulate payday loans.
On Thursday of last week, our Ohio Supreme Court told the legislature it had not accomplished what it set out to do. Ohio voters do not have the protections they overwhelmingly endorsed. I hope our legislators are energized by the decision in Cashland v. Scott to step forward in a bi-partisan effort to give Ohio consumers the protections they want and deserve.
Small dollar lending exploded in Ohio during the economic downturn from which we are all still struggling to recover. Just to give you an idea, as of last Friday, the Ohio Department of Commerce’s website shows 1,347 mortgage loan or small loan branch licensees. These are the two licenses under which former payday lenders are now doing business. No lenders are licensed under the Short Term Loan Act, the statute passed to reform payday lending.
In addition, auto title lending has moved into Ohio. These business sought licenses as Credit Services Organizations; currently Commerce has 45 active CSO licensees. Twenty-seven (27) of these licensees advertise that they make title loans. A quick internet check reveals that six of these 27 title loan companies have a total of 585 store front locations throughout Ohio. Yet, these companies are not really lenders. They act basically as brokers, arranging loans with out-of-state lenders and collecting fees that range from 20% to 80% of the principal. These fees are in addition to loan origination fees, credit check fees, lien recording fees, and interest paid to the lender.
As this information demonstrates, the small dollar lending market is very nimble. When regulators or legislators close one door, this industry finds a way to open another to get into the pockets of cash strapped consumers. The industry stresses that these loans are helping many consumers pay their bills. The main industry group says: “Given the recession and the economy that we are in, many Americans have depleted their savings and there is no cushion, many are living paycheck to paycheck and must turn to short-term credit options to manage their financial obligations.” Sadly, many Ohioans have been very hard hit by the recession, and are struggling to meet financial obligations. Knowing that your pay check will not stretch far enough to cover your bills is stressful and makes consumers vulnerable to payday and auto title loans, deposit advances, personal installment loans, and other small dollar predatory loans.
These loans are predatory because they are not based on the borrower’s ability to repay. As Senator Brown has already told you, the CFPB found that borrowers are using these loans to meet basic expenses, and paying back much more in fees that they pay in principal. According to another study, 37% of borrowers surveyed reported being so desperate for cash that they would accept a loan under any terms.
These loans are predatory because industry profitability depends on repeat borrowing. Many lenders offer incentives to encourage repeat borrowing. Borrowers can achieve Silver, Gold or Platinum status for repeat borrowing, and receive discounts or bonuses for referring new customers. According to industry analysts, in a state that permits $15 in fees for $100 borrowed, an operator needs a new customer to take out 4 to 5 loans before that customer becomes profitable.
This industry is creative, and very sophisticated, involving loan brokers and lead generators, partnerships with out-of- state companies and entities that exist only on the internet – all designed to maximize fees and profit for an industry that targets those least able to repay the principle, thus keeping borrowers in a cycle of debt.
Payday and other short term small dollar loan products hurt borrowers and their families by trapping them in a cycle of debt, draining money away from the household.
Payday also hurts our communities and our economy. A 2013 study from the Insight Center for Community Economic Development examined the net impact of payday lending in terms of value added to the national economy and jobs. Insight’s study found that the payday lending industry had a negative impact of $774 million in 2011, resulting in the estimated loss of more than 14,000 jobs. U.S. households lost an additional $169 million as a result of an increase in Chapter 13 bankruptcies linked to payday lending usage, bringing the total loss to nearly $1 billion. These findings of net economic loss were confirmed most recently by the Louisiana Office of Financial Institutions, whose study showed the impact of payday lending resulted in a net economic loss of $42 million in economic activity for Louisiana.
Now, more than ever, we need strong regulations. The Consumer Financial Protection Bureau has carefully and thoroughly studied the small dollar loan market. It is now situated to enact regulations that protect consumers from the current array of small dollar loan products, and anticipate future abusive products. Consumers need access to credit that is reasonable and affordable, grounded in sound lending practices.
But the CFPB is not the sole regulator of the small dollar lending marketplace. Ohio has control over who does business with Ohio citizens, and how they do business. CPFB and state action are complementary. Ohio can set interest rate caps, require a minimum number of payments and minimum loan terms, and eliminate fee harvesting middle men. Our legislators need to act now. Ohio borrowers deserve a fair marketplace.
Last July we told you about House Bill 2 – the bill that as originally proposed would have required every unemployed Ohio worker seeking unemployment compensation benefits to electronically “register” (prepare and post a complete job resume) on the new OhioMeansJobs before he or she could receive any unemployment benefits. Check out our July 25, 2013 posting “Advocates Improve Unemployment Compensation Bill for Ohio Workers” for the details on HB 2.
To sum up, as a result of discussions among the Governor’s Office, the Ohio Department of Job and Family Services (ODJFS), and worker advocates (including the Ohio Poverty Law Center), HB 2 was substantially amended before being passed by the General Assembly and signed by the Governor. For example, the requirement that unemployment compensation applicants electronically register on the OhioMeansJobs website as a precondition to receiving any unemployment benefits was dropped. In addition, ODJFS provided assurances that unemployed workers could initially apply for benefits and register by phone and could also choose to receive information about job matches by phone. This new law just took effect earlier this month – on April 11, 2014. It will take at least several months to evaluate the possible impact – both good and bad – of the changes triggered by the implementation of HB 2.
The debate and negotiations over HB 2 should have lain to rest mandatory electronic filing requirements for unemployment compensation. However, in March of this year, the Kasich administration introduced the budget corrections bill – the so-called Mid-Biennium Review (MBR). Buried in that 2500-page bill was a surprising provision that would require everyone – with certain narrow exceptions – to electronically file their initial applications for unemployment compensation benefits and all subsequent continuing claims. This troubling provision became part of the appropriations bill, House Bill 483 (HB 483). HB 483 was on a fast track for passage by the House Finance Appropriations Committee (and the full General Assembly).
Once again, the Ohio Poverty Law Center (OPLC), Policy Matters Ohio, Disability Rights Ohio, Protecting Ohio Employees, and other worker advocates opposed this electronic filing mandate and requested its removal from HB 483. Once again we were successful. The controversial language was taken out of HB 483.
Unfortunately this issue is like a bad guest that will not leave the party. Similar language may be incorporated into a separate, stand-alone bill to be introduced in the General Assembly in the near future. So the battle is not over, but removing the language from the budget bill is a significant victory for unemployed Ohio workers because the legislature is likely to proceed with greater deliberation and care in considering a separate bill during the regular legislative process – instead of the fast-track, high-pressure budget appropriations process.
The legislature should take a deliberate approach. The recent disastrous experience of Florida in implementing a similar law, resulting in tens of thousands of workers losing their unemployment benefits and a finding by the U.S. Department of Labor that Florida’s unemployment compensation system violated the Americans with Disabilities Act, the Civil Rights Act of 1964, and other major federal civil rights laws, is a cautionary tale. Data from Connect Ohio shows there is still a significant digital divide in Ohio. For example, only 72% of Ohio homes subscribe to in-home broadband access. The adoption rate is even lower in Appalachian Ohio and among low-income households, persons without a college education, older Ohioans, and adults with disabilities. Moreover, at least one in eight Ohioans who did not subscribe to broadband service do not do so because of their lack of computer skills, and more than 2.7 million working-age Ohioans have difficulty completing many computer-related tasks required by today’s employers. There are also some communities – and in particular in southeastern Ohio – where residents do not even have access to broadband service.
Obviously, and despite all the contrary information, an all-electronic system for handling unemployment compensation has the attention of both the Ohio legislature and the Governor. OPLC and its partners plan to stay on top of any future legislative efforts to require electronic filing of all unemployment compensation applications and continuing claims, and potentially even more intrusive requirements such as completing extensive online questionnaires or tests without a telephone alternative or being able to obtain in-person assistance at local, OhioMeansJobs sites. But every Ohio worker has a stake in the outcome of continuing legislative efforts to sacrifice worker access to critical benefits in the name of efficiency and economy. In weighing the options, access to benefits should always win out.
written by Mike Smalz
In the struggle to regulate the short term, small dollar loan industry, one theory regularly pops up. This theory states that if such loans are capped and regulated, violent loan sharks will take the place of legitimate small loan businesses that would not be able to survive under such onerous regulation. The violent loan shark threat is mainly raised by industry members and supporters, as most recently happened in Idaho, where a legislative fight to rein in payday loans is waging. An industry supporter quoted in the local news cautioned that making it harder to obtain payday loans could drive borrowers underground. “The danger is that they turn from this sort of legal high-cost loans to illegal high-cost loans such as loan sharking, which, of course, is not a good thing.” In a 2012 article from the Washington and Lee Law Review entitled Loan Sharks, Interest-Rate Caps, and Deregulation, Professor Robert Mayer debunks this “loan shark thesis” using well-researched historical evidence and common sense analysis.
According to Mayer, loan sharks have existed in America at least since the Civil War. The name comes from their predatory behavior, in which the lender seeks to keep the borrower in a cycle of repeated renewals of the high-interest loan. The lender is more concerned with the regular interest payments than the principal itself. Enforcement methods of these early loan sharks did not involve violence at all; instead, loan sharks focused on non-violent personal harassment, wage assignments, and power-of-attorney based judgments to get their money. The idea of violent loan sharks with ties to organized crime did not arise until the 1960s, when splashy headlines captured the public’s attention and forever linked the term to violent enforcement of repayment.
Payday loan regulation was enacted in about three quarters of the states by the mid-twentieth century and was based on a common structure, which limited not only interest rates but contained other regulatory oversight. By the 1950s, many commentators were declaring the problem of predatory lending over because of this regulation, which had placed reasonable limits on the small loan industry.
According to Mayer’s analysis, violent loan sharks historically did not simply pop up wherever strict regulations were enacted. They were limited to certain geographic areas, which tend to be large metropolitan areas like New York, Chicago, and Philadelphia. This suggests that mob-tied loan sharks exist only where organized crime is prevalent, which makes logical sense. It seems unlikely that criminals are in the business of monitoring legislation to pick and choose where they will operate as illegal lenders. Moreover, loan sharks did not come about right after regulation; it took a relatively long time. For instance, Illinois passed a regulatory law in 1917, yet there is no historical evidence of loan sharks being active there prior to World War Two.
Moreover, loan sharks do not target people living paycheck-to-paycheck because the loan sharks do not want to be forced to violently enforce the loan agreement; no one wins when the lender does not get his money back. They are careful to only loan money to those who are likely to pay them back in a short period of time. Payday lenders, on the other hand, cater to the working class who sometimes require cash to tide them over until their next payday. The markets for loan sharks and payday lenders are entirely different, so a rise or fall in one will not necessarily affect the other.
Nevertheless, the “violent” loan shark business and the payday loan business share a common business model. Both are more interested in keeping borrowers in a cycle of debt and profiting from continued interest payments. Multiple studies of the payday loan industry document that repeat borrowing is the norm, and that the industry depends on repeat borrowing to make enough money to stay in business.
A number of states have never legalized the short term, small dollar loans commonly called payday loans, and several others who initially permitted payday lending have since imposed interest rate caps, or allowed enabling statutes to lapse. Yet, the industry has not put forth any credible evidence of an influx of violent, mob-tied loan sharks roaming the streets, filling a lending void in those states.
As Mayer notes, no specific evidence ties payday loan regulation to criminal lending because none exists. Modest regulation of the payday loan industry does not bring violent loan sharking to the forefront of the small loan industry. It does, however, save working class people money and helps prevent them from falling into a destructive debt cycle.
On December 10, Ohio legal aid advocates, represented by Julie Robie from the Legal Aid Society of Cleveland, participated in an oral argument before the Ohio Supreme Court in the case of Ohio Neighborhood Finance, dba Cashland v. Scott. What is notable about our participation is that legal aid did not represent any party involved in this case. Cashland had its stable of expensive big firm lawyers to brief and argue the case. Mr. Scott has long since gone on with his life, having made no appearances in any of the courts hearing his case. Legal Aid and our allies appeared as amici, or friends of the court, to give the Ohio Supreme Court the consumer perspective on the issues involved in this important case.
This case is important for consumers because it challenges the current business model of payday lending in Ohio. As some of you may know, in 2008, Ohio adopted a statute reforming payday lending, repealing the old business model that allowed short term, single pay loans with 391% APR. Ohio has never used the term “payday” loans in its statutes – when enabled in 1995, they were “loans by check cashing lender licensees.” These old loans were eliminated, and replaced with “short term loans.” The loan period for short term loans must be a minimum of 31 days, with a maximum APR of 28%.
Despite legislative reform, payday lending continues as usual for Ohio borrowers. No lenders are licensed under, or making loans under, the Short Term Loan Act. Instead, lenders like Cashland made deliberate business decisions to continue making payday loans, shoehorning into other lending licenses and making convoluted legal arguments to justify evasion of Ohio law. The Elyria Municipal Court and the 9th District Court of Appeals said Cashland cannot make payday loans under the lending license they currently hold. Now it is up to the Ohio Supreme Court to say “yes” or “no.”
But if the Ohio Supreme Court says no – no payday loans – what will this mean for Ohio borrowers? No more payday loans, at least in this current form? I wish. Unfortunately, the consumer small loan industry will continue to flourish. Even as we await the Cashland decision, cash-strapped Ohioans can get a short term consumer installment loan secured by a postdated check. Or they can stop in their friendly neighborhood auto title loan shop and walk out with a loan secured by the title to their car. And all of this and more can be done over the internet and without leaving the comfort and convenience of home. This market, “the financially underserved market”, generated $89 billion in fee and interest revenue in 2012. This industry is limited only by the ingenuity of its management teams, clever legal staff, and the greed of its funders and investors.
Under the veneer of industry best practices and superior customer service, the short term loan industry is making money selling credit to struggling families as a means to bridge the income gap. None of these financial products help struggling families address the underlying problems of chronic income shortfalls, or help families build wealth so they can move up the socio-economic ladder. Despite very credible studies showing that the economic activity generated by this industry results in a net loss to the economy, this industry will thrive until policymakers step up to the plate.
Stepping up to the plate doesn’t just mean better regulation of the industry and more consumer protections. Enforcement of existing consumer protection laws and the political will to stop predatory lending will always lag behind this constantly moving target. Stepping up to the plate means policy makers must address the much tougher issues involved in closing the income gap between low wages and what it really takes to make ends meet.
The political struggle to expand Medicaid, the Governor’s refusal to apply for a federal waiver to waive work requirements for food stamp recipients, the shrinking Ohio Works First program, continued high unemployment rates and Congress’s refusal to extend Emergency Unemployment Compensation all indicate that Ohioans will not soon see any real shift toward policies that support working families in the struggle to not just to make ends meet, but to make a better life for themselves and their children.
In the meantime, 46 Credit Services Organizations, 234 Ohio Mortgage Loan Registrants with 1202 Mortgage Loan registrant branch offices, 32 Small Loan Licensees with 171 Small Loan licensee branch offices, 150 licensed pawnbrokers with 178 branch store fronts (as of December 19) will be in our neighborhoods or at our fingertips to help us get the money we need. As long as we can afford their exorbitant fees and interest.
Recently, Ohio residential consumer advocates were invited by the Public Utilities Commission of Ohio (PUCO to file comments of on the rules governing the connection, disconnection and reconnection of gas and electric service and Ohio’s low income assistance program the Percentage of Income Payment program Plus (PIPP Plus) as part of the PUCO’s five-year review. Collectively, the consumer advocates are the only voice for everyday residential consumers before the PUCO, who makes and enforces rules regarding: utility security deposits, appropriate proof of consumer creditworthiness, and the timing and manner of shut off notices. This case is the only place where advocates can make recommendations on behalf of low- income customers who depend on the PIPP Plus program to get and/or remain connected to their utility to have heat and lights. These rules affect over 7 million customers who get gas or electric utility service from one of the regulated utilities in Ohio such as Duke, First Energy, AEP, or Columbia Gas, to name a few.
Consumer advocates urged the adoption of rules or changes to the rules in order to protect customers and maintain service without undue harm to utilities. In addition, the advocates made recommendations to improve PIPP Plus, which makes electric and gas payments affordable for low income Ohioans. The PIPP Plus program was created almost 3 years ago when the “Plus” was added to the existing PIPP program to provide arrearage forgiveness to many residents who had built up significant utility debt. The consumer advocates made the following recommendations for the Credit and Connection rules:
- Reduce utilities’ use of Social Security numbers to reduce the risk of identity theft
- Make security deposit requirements reasonable and affordable
- Connect service within a reasonable time after a request for service has been made
Similarly, the advocates also offered suggestions when disconnection or reconnection of service is an issue:
- Forbid landlords from using utility shut-offs to force tenants to move
- Require reconnection soon after payment is received if service is disconnected for nonpayment
- Make tenants liable only for service for the times that they actually rent and occupy a unit
- Create uniform rules and allow online access to forms for both residents with health emergencies and their healthcare providers to request temporary waivers of payment during health emergencies
This is only a sample of suggestions made by the consumer advocates. Click here and here to see all of the topics covered. Use this link to see the current rules and the rule changes proposed by the Staff of the PUCO.
As mentioned previously, consumer advocates also made numerous recommendations to improve the PIPP Plus program, such as:
- Maintain a hardship exemption to waive the $10 minimum payment for up to six months
- Allow customers the benefits of arrearage forgiveness if they fully or partially pay in advance
- Extend the time periods for customers cycling off PIPP Plus (for whatever reason) to provide payment schedules that are reasonable and affordable
- Allow the transfer of delinquent accounts to a PIPP Plus account
- Provide a more expansive definition of “on-time payment.”
Our positive recommendations will only improve the current rules, and we hope that the PUCO agrees and adopts many of these recommendations. The consumer advocates who jointly submitted comments include: the Ohio Poverty Law Center (OPLC) as well as most of the legal aid programs in Ohio, the Ohio Partners for Affordable Energy (OPAE), the Ohio Consumers’ Counsel (OCC), the Citizens’ Coalition, the Coalition of Homelessness and Housing in Ohio (COHHIO), the Ohio Association of Area Agencies on Aging (OAAA), the Ohio Association of Community Action Agencies (OCAA), and the Ohio Association of Food Banks.
OPLC releases Health Care and Uncompensated Care Fact Sheets for Ohio Counties
The Ohio Poverty Law Center recently developed uncompensated care and Medicaid fact sheets for each of Ohio’s 88 counties to illustrate the benefits of expanding Medicaid on local economies. For more than a year, Ohio has been debating whether to expand Medicaid to Ohioans up to 138% of the federal poverty level. That expansion would provide access to health care for 300,000 very low-income Ohioans who are currently uninsured and have little or no access to health care.
For each county, the fact sheets include:
- the number of uninsured adults living in the county
- the number of uninsured adults living in the county with incomes at or below 138% of the federal poverty level who would be eligible for Medicaid under an expansion
- the current number of Medicaid recipients living in the county
- the amount of uncompensated care provided by hospitals
This information illustrates the economic benefits Medicaid expansion would have on local economies by (1) reducing medical debt so that low-income patients and their families can use their scarce resources for other necessities such as food and housing, (2) dramatically reducing cost shifting by hospitals for care provided to uninsured patients, and (3) pumping millions of dollars into county economies and billions of dollars into the state’s economy via Medicaid payments to hospitals, physicians and other health care providers.
For a full set of the county fact sheets, visit: http://www.ohiopovertylawcenter.org/county-medicaid-expansion-fact-sheets
Studies have found that every $1.00 of Medicaid spending generates about $3.15 of economic activity so that this multiplier effect will help to create even more new jobs and businesses in Ohio’s counties. One such study is: R Greenbaum and A Desai. Uneven Burden: Economic analysis of Medicaid expenditure changes in Ohio. The Health Foundation of Greater Cincinnati, Cincinnati, Ohio 2003. http://www.ppm.ohio-state.edu/ppm/Medicaid.pdf.
Of course, the benefits of expanding Medicaid go far beyond mere dollars and cents. Improved health status, extended life expectancy, expanded employability, greater family stability and other personal and societal benefits will eventually dwarf the economic impacts, but the economic benefits to the state and each of Ohio’s counties should persuade policy makers who only focus on the bottom line too support expanding Medicaid.
Please share this information with friends and neighbors and encourage everyone to contact their legislators to ask them to support expanding Medicaid in Ohio to the fullest extent
Let us all hope that Ohio takes the steps to expand Medicaid soon so that all Ohioans and our local and state economies can enjoy the benefits beginning in January 2014.