The next Ohio House speaker will quickly confront payday lending legislation that has become mixed up in an FBI investigation, nasty House GOP infighting, and accusations of threats and stall tactics.
Some payday lenders say they are willing to compromise. But both the author of the payday legislation and the front runner to become speaker say the industry’s goal is to stall.
Rep. Ryan Smith, R-Bidwell, who could be named speaker when the House meets Wednesday, said he has been attacked by payday lending interests trying to stop House Bill 123, which seeks to regulate what consumer advocates say are the highest rates in the nation on small-dollar, short-term loans. Too often, critics argue, the loans trap low-income borrowers in a cycle of debt.
The bill passed a committee without changes and was set for a House vote in April.
But the Ohio House has not passed any legislation since April 11, following the sudden resignation of former Speaker Cliff Rosenberger, R-Clarksville, amid an FBI investigation. Sources have confirmed that probe includes a trip with payday lending lobbyists to Normandy, France in September 2017. Payday lobbyists also joined him and others on a 2016 trip to China and an August 2017 trip to London.
Rosenberger "was telling members and editorial boards that he favored reform while telling certain lobbyists and their clients that he would prevent any reform from taking place on his watch," the Ohio Consumer Lenders Association wrote to Rep. Naraj Antani, R-Miamisburg, in May.
That letter, signed by payday executives Ted Saunders (CheckSmart) and William "Cheney" Pruett (CashMax), says the association was unaware of the trips some lobbyists took with Rosenberger. They said Rosenberger, during an October meeting with the industry and others about House Bill 123, "very clearly threatened the industry with unspecified negative consequences if there were any further conversations by OCLA’s lobbyists."
"I don’t remember that," said Rep. Kirk Schuring, R-Canton, who was in the meeting.
Late last fall, Rosenberger handed the payday issue to Schuring, R-Canton, the No. 2 House leader. Prior to that, Rep. Bill Seitz, R-Cincinnati, who some saw as more friendly to the industry, was taking the lead on crafting changes to the legislation.
"All I remember is oftentimes, if there’s a tough issue, I’m the guy who gets the assignment," Schuring said when asked why he got the bill.
Seitz said he thought House Bill 123 had a litany of problems. In a letter to colleagues, he said he was working on a compromise with the Consumer Lending Association, including a ban on loans with terms shorter than 30 days, when the issue was handed to Schuring.
"It is inaccurate to claim that (the association) was simply trying to stall," Seitz said.
Schuring agreed that some payday lenders are interested in new regulations. In March, he proposed a list of payday regulations, a number of which sounded like what Seitz had worked on. It included the minimum 30-day loan, plus four interest-free payments to struggling borrowers.
Bill sponsor Rep. Kyle Koehler, R-Springfield, said the proposal still allowed lenders to charge rates well above 300 percent and didn’t do enough to address fees. Nick Bourke of the Pew Charitable Trusts called it "vague payday-lender-friendly ideas that evidence shows have harmed consumers in other states."
Three weeks later, Schuring returned with new proposals. Pew and Koehler said they were not optimal, but were a good step forward.
However, Saunders of CheckSmart called the proposals, which included a ban on loans of less than 180 days, "unworkable." The committee, a day removed from learning that Rosenberger was resigning, declined to accept it.
"Frankly, I think it was a little because people were flustered by what happened and they didn’t know what to do," Schuring said.
Koehler was frustrated. "That was the evening I decided they are just trying to stall, stall, stall," he said of the lenders.
Saunders and Pruett said that a week earlier, Schuring told them that Rosenberger was threatening to pass the bill as-is if they didn’t go along with the changes they said would "cripple the industry." Support for that bill, they said, arose "only when political cover for bad behavior was needed."
Schuring described it this way: "Here’s what was going on at the time — get something passed, one way or another. Either get that amendment inserted, and if that doesn’t work, then pass the bill as-is."
Passing a major reform bill without any amendments is unusual. But no compromise appears to be acceptable to both the industry and consumer advocates — similar to when lawmakers tried to rein in the industry 10 years ago, only to see lenders skirt the limits.
Lawmakers generally don’t like passing regulation when one side is fiercely opposed. The payday industry has given $1.8 million in direct contributions to state candidates and political parties since 2010, most to Republicans.
"It does not appear that the process has not been the most advantageous for good legislation," Rep. Michael Henne, R-Clayton, wrote to colleagues recently. "When one side claims victory and the other complete defeat while willing to make concessions, the legislative process has failed."
Koehler said he doubts the payday industry is interested in serious concessions. He noted that one proposal, the ability to get four interest-free payments, is already industry standard.
"It is beyond discouraging to keep hearing that (the Lending Association) supports reasonable caps," he said.
If Smith is voted speaker, the bill is expected to be near the top of his to-do list. He is likely to be challenged by Rep. Andy Thompson, R-Marietta, and Minority Leader Fred Strahorn, D-Dayton.
"I know I have the votes to pass it," Koehler said. "I’m concerned that a lot of the no votes are saying they’re supporting Rep. Thompson."
Schuring said there may still be an effort to amend the bill, which says a borrower cannot be required make a payment that is more than 5 percent of his monthly pay.
"We’ve got to get that passed," Schuring said of the bill.