Ohio Pastor Says Churches Can Help With State’s New Law Regulating Payday Lending

Ohio’s new law regulating payday lending is an important advance, but the church plays a vital role in helping people who often become casualties of the predatory industry, Southern Baptist pastor David Gray says.
Photo courtesy of Jack Kwok

Ohio’s new law regulating payday lending is an important advance, but the church plays a vital role in helping people who often become casualties of the predatory industry, Southern Baptist pastor David Gray says.

Gov. John Kasich signed into law July 30 what some advocates have described as a model for the country in addressing abuses by lenders who often draw poor people into a debt trap by charging exorbitant, and often misleading, interest rates.

In the industry, a lender may portray an interest rate as 15 percent, but it actually is only for a two-week period until a person’s next payday. The annual interest rate in payday lending typically is about 400 percent, making it extremely difficult for a borrower to repay the loan.

The new Ohio measure says a loan of no more than $1,000 can be made for 30 days to two months, but a loan for less than 90 days cannot surpass a monthly payment of more than seven percent of a borrower’s net income per month, according to The Columbus (Ohio) Dispatch. The interest rate is capped at 28 percent, while a monthly maintenance fee cannot be more than 10 percent or $30, whichever is less, The Dispatch reported.

Gray — pastor of First Baptist Church of Garrettsville and a former president of the State Convention of Baptists in Ohio — described the law as “a good first step. It really is because people were being taken advantage of in amazing and sad ways.”

The Fairness in Lending Act is “the beginning of an answer,” but the real “answer is with the church speaking to its people and teaching them how to not fall into the trap that payday lenders give,” Gray told Baptist Press in a phone interview. “You know, easy money is never easy. And that’s really the great challenge that we have — that a person thinks they’re solving a problem and they go about it in a short-term way. And that short-term way is extremely destructive, and so it makes for opportunists to really get ahold of a community.”

Jack Helton, executive director of The Ohio Baptist Foundation, told BP in written comments, “Anytime institutional lending legislation can provide assistance in helping a consumer deal with the stress of financial difficulties, and do so by providing opportunities for them to seek equitable financial solutions that are beneficial to them and their families, and encompass a fair and reasonable profit for the lending institution that does not include greed, that legislation should be enacted, promoted and championed. I believe this legislation accomplishes that!”

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SOURCE: Baptist Press, Tom Strode