Ohio Payday Lender Interest Rate Cap, Issue 5 (2008)

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The Ohio Payday Lender Interest Rate Cap Act, also known as Issue 5, was on the November 4, 2008 ballot in Ohio as a veto referendum, where it was approved.[1] This statute puts a cap on interest rate payday lenders can charge at 28%.

Election results

Ohio Issue 5 (2008)
Approveda Yes 3,263,345 63.63%

Election results via the Ohio Secretary of State.[2]

Text of measure

The language appeared on the ballot as:[3]


Substitute House Bill 545 (H.B. 545), which was passed by the Ohio legislature and signed into law by the Governor, substantially changed the law regulating how certain lenders in Ohio operate. Under the referendum, voters must decide whether Section 3 of H.B. 545 should go into effect. Section 3 of H.B. 545 deletes the old provisions of the law regulating check cashing lenders, sometimes known as “payday lenders,” in favor of the new provisions.

1. If a majority of Ohio voters approve Section 3 of H.B. 545, all short term lenders, including check cashing lenders, would be subject to the following limitations:

  • The maximum loan amount would be $500;
  • Borrowers would have at least 30 days to repay the loan; and
  • The maximum interest rate would be 28% annual percentage rate (APR) on all loans.

2. If a majority of Ohio voters reject Section 3 of H.B. 545, check cashing lenders would be allowed to continue under previous law as follows:

  • The maximum loan amount would continue to be $800;
  • There would continue to be no minimum repayment period; and
  • Check cashing lenders could continue to charge rates and fees, resulting in a total charge for a loan that substantially exceeds an equivalent APR of 28%.
A “YES” vote means you approve of Section 3 of H.B. 545, and want to limit the interest rate for short term loans to 28% APR and change short term lending laws.
A “NO” vote means you disapprove of Section 3 of H.B. 545 and want to permit check cashing lenders to continue to be able to offer short term loans as currently permitted.

A majority YES vote is required for the amendment to be adopted.
Shall the proposed amendment be approved? [4]


HB 545 was approved by state lawmakers and the governor in late spring. Opponents of the new restrictions (mostly the payday lending industry) quickly moved to try to overturn it using Ohio's veto referendum process.

The payday lending industry is an $85 billion industry that provides short-term loans, which are usually secured with a check postdated to the borrower's next payday. The interest rate in the absence of regulation has typically worked out to an average of $15 per $100 borrowed on a two-week loan. The high interest rates are what has led to legislative attempts to cap those rates. In fifteen states, the practice was illegal by 2008.[5]

Due to winning a recent battle over the ballot language, the referendum that was presented to voters on the November ballot contained no mention of a 391 percent interest rate many payday lenders charged. Instead, it told voters that if they reject a portion of the law restricting the industry, payday lenders would be able to charge rates and fees that "substantially exceed" a 28 percent annual rate.[6]


State Rep. Christopher Widener, R-Springfield, supported HB 545, saying "I designed House Bill 545 to protect Ohioans from a dangerous product that has been sold at an egregious price. Sadly, the REJECT House Bill 545 Committee would prefer to prey on Ohio consumers than agree to the terms of the new legislation."[7]

Arguments in favor

The following reasons were given in support of Issue 5 by a committee appointed by the Ohio Ballot Board:[3]

Is 391% interest too high? YES.

A yes vote caps the annual interest on a payday loan at 28%. Payday lenders don’t like the interest rate cap. They want to charge 391% APR on a typical two-week loan. That’s why the national payday lending lobby spent millions on misleading TV ads and petition circulators to get Issue 5 on the ballot.

Here’s what a Yes vote on Issue 5 does:

  • Keeps the 28% interest rate cap.
  • Forbids lenders from charging 391% APR on a typical two-week loan.
  • Helps breaks the cycle of debt. Payday lenders prosper by trapping vulnerable Ohioans into a cycle of repeat borrowing. Their neon signs offer the false hope of a quick fix but instead borrowers typically end up with 12 or more loans each year.
  • Gives borrowers more time to pay back loans and helps create more affordable small loans.

Here’s what a YES vote does NOT do:

  • It does not take a good credit choice away from borrowers. Payday loans with 391% APR are defective products that trap borrowers, and the government has an obligation to keep defective products off the market.
  • It does not mean an end to 6,000 jobs. Most of Ohio’s payday lenders already have applied for new state licenses to offer other types of loans in Ohio, which suggests they plan to remain in Ohio.

Reckless lending hurts more than unsteady borrowers. It puts a strain on our charities, increases demand for social services and undermines families and communities.

Ohio has one of the best payday lending reform laws on the books!

Please vote Yes on Issue 5 and Keep Ohio’s payday lending reforms.[4]

The official ballot argument in support of Issue 5 was signed by the mayor of Columbus Michael B. Coleman, Philip E. Cole, Lisa Hamler-Fugitt, Bruce R. Ough, and E.J. Thomas.


Reject House Bill 545 and Ohioans for Financial Freedom were the names of groups supporting repeal of HB 545; these groups were mostly composed of those in the payday loan business.

A letter from one payday loan operator to the people of Ohio surfaced quickly after the interest rate cap was passed to give people a different view of an industry that by some is considered cruel and seen as taking advantage of their customers:[8]

"Some [customers] are shocked, some are mad and some are upset because not only do they depend on us, but they also have formed a great friendship with my employees and me. Oh, yes, did I also mention that I recently gave money to three individuals, out of my pocket, because they needed a little to hold them over until payday? Yes, we payday lenders really do such things. My customers will have nowhere to go unless our legislators are going to make these short-term loans.[4]

Organizations that supported repealing HB 545 include:

  • Call & Post, Ohio’s largest African-American newspaper
  • CORE (Congress of Racial Equality)
  • C.O.A.S.T.(Coalition Opposed to Additional Spending and Taxes)
  • The Ohio Chamber of Commerce
  • The Ohio Grocers’ Association
  • The Ohio Christian Alliance
  • The National Taxpayers Union (NTU)

Near the end of the campaign, financial newspapers reported that Advance America, one of the payday lenders that would be affected by the measure, stood to lose $42 million if forced to close its centers in Ohio.[9]

Arguments against

The following reasons were given in opposition of Issue 5 by the Committee to Reject H.B. 545:[3]

If approved Issue 5 would:
  • Eliminate a valued credit choice for many hardworking Ohioans who need temporary financial help, and jeopardize thousands of Ohio jobs.
  • Infringe on personal privacy and require that everyone taking out short-term loans be listed by name in a government database.
  • Limit consumers to four short-term loans per year and deny consumers access to other affordable choices.

Why you should vote no on Issue 5:

Hardworking families make difficult financial choices everyday. Taking a legitimate credit option from them, especially when they have an emergency or an unexpected need, will result in greater financial hardship.

Ohioans deserve the freedom to make their own financial decisions - it should be an individual’s choice on which lending option to use, not a politician’s.

Payday advances are a sensible credit option. They cost only $15.00 per $100 borrowed. By comparison, banks charge $29.00 for overdrafts and $37.00 for late fees on credit cards. Other fees can be as high as $57.00.

Vote no on Issue 5, to preserve a short-term loan option that is simple, reliable, and confidential - and often the cheapest available.

Vote no on Issue 5, to ensure that those who need short-term financial help will have a choice.

Vote no on Issue 5, to guarantee your right to access practical credit.

By voting no on Issue 5, you will preserve the jobs of thousand of employees within the financial services sector. In Ohio’s difficult economy, further job losses should be avoided, particularly good jobs - with competitive salaries and benefits.

Vote no on Issue 5, to preserve financial choices; confidentiality and privacy in personal borrowing; and, the retention of up to 6,000 jobs for Ohio workers.


The official ballot argument in opposition of Issue 5 was signed by Stephen J. Schaller, Robert M. Greiser, and Bridgette C. Roman.

Campaign contributions

$19 million was spent by payday lending companies on Issue 5.[10][11]

See also

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External links