1,2,3 Easy as Do-Re-Mi – Why Read H.B. 123?

GOP Leadership and The Editorial Boards Unanimously Agree:  Don’t Read This Bill!

By Steve Holmes


For the past decade, Republicans have scornfully derided United States House of Representatives Minority Leader Nancy Pelosi (D-CA) for pushing through the Affordable Care Act, aka Obamacare, without so much as reading the bill.  Pelosi, the House Speaker from 2007-10, scrambled to make wholesale changes to President Barack Obama’s signature legislation in the dead of night and to vote the bill out of The House all in one day. When asked if anyone could have possibly actually read the bill before voting on it, Pelosi infamously answered "We have to pass the bill so that you can find out what is in it." 


Republicans have been using that line for eight years as an example of how a legislative body should not work. They have pushed the idea that bills should be read and thoroughly understood before being voted upon. The Plain Dealer and The Columbus Dispatch have gone on and on about how sunshine must be forced into government and the legislative process must be more open and deliberate, and that policy makers should read legislation before it passes, as it is their obligation.


Except House Bill 123. 


Just pass that one, as is, no amendments, the time has come, and if Ohio’s legislators dare to read and understand the bill, they better not make a solitary change because it just needs to pass as is. The temporary leadership of the Ohio House of Representatives appeared to agree, making passing H.B. 123 (Koehler-Ashford) a priority for this week’s post-primary legislative session. Initially no discussion was sought on the bill. The Government Oversight Committee passed it 9 to 1 without much debate.  Even The Plain Dealer’s Brent Larkin  called for legislators to pass the bill without reading it.  The Committee waited one week to vote on the bill before sending it to the full House for a vote.  It passed without accepting any amendments. 


This weekend, the Plain Dealer and Dispatch both opined that the House better pass H.B. 123 or else. 


But then In an interesting twist, the Plain Dealer also provided this insightful opinion piece from the Heritage Foundation that challenges the thinking of the Pew Charitable Trust, one of the key backers of pay day lending reform in Ohio. In the meantime, over the last few weeks, house members have received tens of thousands of emails, telephone calls, letters, and social media posts by actual users of consumer finance companies, not known to be editorial board employees. And as we all know, legislators get extremely nervous when constituents start bothering them.


The consumer finance industry, whose customers number in the hundreds of thousands of Ohioans, perhaps more than one half million annually, are fighting back against the current form of H.B. 123 with a campaign that includes the website www.123isbadforme.com. The Ohio Consumer Loan Association is sponsoring the campaign and legislators may be inclined to actually read the bill. The temporary House GOP Leadership has called off the floor vote on the issue and scheduled a policy discussion on the topic. 


The bill is worthy of discussion as it would actually eliminate an entire industry in Ohio, leaving the hundreds of thousands of Ohioans who use these short- term loans without credit options. Yale University recently surveyed Ohioans and concluded that 48% of Ohioans could not come up with $400.00 in a pinch if they needed to for an emergency. Not only could half of Ohioans not come up with that amount of cash, but they were not credit worthy enough to put $400.00 on their credit card if they had one.  An emergency $400.00 may be easy for well paid union jobs like editorial board writers, but virtually half of Ohioans cannot cough up that kind of money if needed.  Legislators can cough it up, they are compensated better than the average income of Ohio working families for their "part time" job. The facts remain that a majority of Ohioans live paycheck to paycheck and have since much of the manufacturing sector went overseas in the late 1990’s. 


Now back to work before the election break, Legislators are starting to take a serious look at this bill and are trying to find out if they really want to put an industry out of business, with actual constituents inundating them with correspondence, not just the elites who deride short term loans. 


Proponents argue that these loans are preying on unfortunate Ohioans who are just not educated enough to make financial decisions and that reforms are needed to protect Ohioans from their own consumer choices. By way of reminder, the legislation that stands as H.B. 123 did not come from any committee process nor interested party meetings which is the key to any fair compromise. Rather, it came from the direction of FBI investigated Cliff Rosenberger, who it is alleged, was going back on a dirty deal to kill the legislation.


How much good could come from that? Rosenberger’s protect his rear-end in the face of the FBI legislation couldn’t possibly be bad for Ohio consumers now could it?


In 2008, changes to traditional payday lending went into effect.  The changes were so radical that no individual or entity was willing to provide this type of loan to a consumer. H.B. 123, if passed would further shut down the industry in Ohio making consumers in need unbankable.


Points of H.B. 123 that would need to be addressed if this is truly a reform and not an attempt to legislate an entire industry out of business in Ohio:

Here is the Legislative Services Commission analysis of the bill: 


*. Eliminates Substantial Portion of Potential Customer Base: Rather than allowing individuals and lenders to decide if they want to provide loans or go into debt for a loan, the bill eliminates consumer choice with mandates about who could be eligible for a loan. Credit can only be extended to working Ohioans, so nobody who has intermittent work or is out of work qualifies for a loan.  Examples of the treatment of any other Ohio consumer being denied credit by law are rare to non-existent. 


* Loan Duration: H.B. 123 pushes the minimum term out to 180 days. A six-month loan would be required, which is very different than the principle of a traditional short-term loan and severely restricts consumer choice.


* Extension of Credit: Prohibits credit service organizations from brokering an extension of credit for a buyer that is less than $5,000, has a repayment term shorter than 180 days, or has an annual percentage rate greater than 28%. This would essentially kill the current business model and prohibit the inclusion of an objective third-party in the lending transaction and create a new regulatory regime more difficult to oversee for Ohio regulators.  


* Modification of Fees and Interest:  The bill takes a novel approach at assigning an arbitrary rate of interest and capping fees, substantially different from current law. By combining the rate of interest with fees associated with the loan, it essentially eliminates the current business model, effectively putting the industry out of business. This has been disputed, but the industry unanimously agrees that no current lender would continue to lend under this circumstance. 


Republicans continue to state that they want to make Ohio “open for business” and tout business friendly regulation. H.B. 123 would actually close off an entire industry, precluding lending to a group of consumers who are turned down by traditional lending institutions and have no other consumer choice.  


Talk about business friendly.


The other argument that Ohio’s Republicans make to the likes of Ohio’s coal and nuclear industry is that capitalism should dictate market conditions for energy.  Doesn’t look like capitalism would appear to be good enough for the finance industry, does it?


With so much at stake with this industry and the hundreds of thousands of Ohioans who rely on it for voluntary loans, why are legislators being told not to read the bill and just pass it as is?  


Eliminating the entire short-term lending industry, forbidding consumer choice based on income, putting thousands of employees out of jobs and restricting access to credit for hundreds of thousands more will eliminate a critical short term financial security option for a large number of Ohioans. With former Speaker Rosenberger’s tainted fingerprints all over this, it would be nice to see the constituents voices be heard every one in awhile.