Broke, USA

CheckSmart, the company that had just been sold for more than a quarter of a billion dollars, put Beatty’s husband, himself a former legislator (she had taken his seat in the legislature), on the CheckSmart payroll. Even the whiff of controversy was all the motivation many in Beatty’s caucus needed to make up their minds about the evils of payday lending. “A lot of wavering Democrats suddenly had very strong opinions,” said Jim Siegel, who covers the state legislature for the Dispatch. Even Beatty came out in support of meaningful payday reform, as if to show that she was not in bed (so to speak) with the industry. Now all they had to do was convince enough Republicans that there was a compelling reason to add to the state’s job loss and shutter an industry that employed several thousand people across Ohio.

In the eight years he served in the Ohio House of Representatives, Chris Widener remembers a gavel being used during a committee hearing only a few times—and all of them were in the winter and spring of 2008, when his committee, Financial Institutions, was debating payday lending. Widener is an architect by profession, thorough and precise, a thin man with blue eyes, metal-framed glasses, and a receding hairline. He believed that any person wanting a chance to speak should be given one and so he held four hearings on the issue, one of which lasted nearly seven hours.

The crowds were large and often raucous. What Chris Browning remembers about her time in front of Widener’s committee was the hissing and the jeering that accompanied her testimony. She told the committee about the GM pensioner who had borrowed money from her store for 115 consecutive months—and people wearing yellow “I Support Payday Lending” buttons and yellow shirts booed and yelled out things like “liar” and “bullshit.” She declared that “repeat borrowers are the payday loan institution’s bread and butter,” which prompted more catcalls and cries. “Widener’s banging that gavel of his and telling people they’ll be quiet or he’ll remove them but it’s not making much difference,” Browning recalled.

An unhappy Allan Jones took his turn at the witness table. He had better things to do than try to explain his business to people who didn’t understand it, yet suddenly he had been told that he needed to worry about shutting down all his stores in one of his best markets. “It’s like overnight we’re hearing we might lose Ohio,” he recalled. With foreclosures starting to spike across the country and the economy starting to teeter, he was worried that payday would end up collateral damage. “Payday didn’t cause any of this but I realized we were being used as an easy scapegoat,” he said. You might not like how I make my money, he told the committee, but the people you’d be hurting if you imposed this cap “were the ones who without us couldn’t pay the electric company or the repair shop if their car breaks down.”

Bill Faith listened in amazement to this heavyset man from Cleveland, Tennessee, who had flown to Columbus in his private jet to lecture the Ohio state legislature about the plight of the working man. “We provide them an essential service to help them when they’re most in need,” Jones said earnestly. Who is this guy, Faith asked himself—and then quickly realized it was his best friend. “I just wanted him to talk and talk and talk,” Faith said. “Because the more he talked, the more he offended everybody.” Faith had the opposite reaction when Lynn DeVault, a Jones underling serving as the president of the payday trade group, took her turn at the microphone. Rather than dismissing the critics as pointy-headed elitists, she acknowledged the payday horror stories but then blamed them on mom-and-pop shops refusing to adopt the industry’s best-practices pledge. Our customers like us, she said, and if that wasn’t quite true, they certainly didn’t dislike them so much that they did something about it. Only about a dozen people a year typically filed a complaint about a payday lender with the state—a small number when compared to those filed against check cashers and others in the poverty business. “Customers are intelligent people who choose the lowest-cost alternative for themselves at a particular point in time,” DeVault told the committee. They can pay us $15 to borrow $100—or they can pay the bank $35 every time they bounce a check or blow $50 paying a utility company a restore-service fee because they were two payments late on their electricity bill.

Terrence Jent, who had worked as a regional director for Check ’n Go, offered a very different perspective than Jones or DeVault. Jent had started as a store manager in his last semester of college and quickly worked his way up from district manager to regional manager. What bothered him about his four years in the industry, it seemed, was the aggressiveness with which they pursued someone who was late in paying them back. “You will receive harassing phone calls three to four times a day,” he told the committee. “All of your personal references will receive phone calls each day. You will be visited at work in an attempt to embarrass you into paying your loan. You will be visited at your home so that you understand that the payday lender knows where you live.”

Yet the hearings, while raucous and often dramatic, weren’t swaying opinions. Widener regularly polled committee members, as did Jim Siegel over at the Dispatch. Both were hearing the same thing. Republican members might be willing to do something about payday but nothing so radical as a rate cap. “They were telling me, ‘We might have to do a bit of tinkering, we might need to put on some kind of limit, but we don’t want to shut an industry down,’” Siegel said. Widener was searching for a compromise that set aside the rates the payday lenders charged but limited people to two loans at any given time or perhaps eight loans a year. “At that point, it didn’t look like anyone was passing anything,” Siegel said.

Steven Schlein might want to claim the role of underdog but in Ohio the payday lenders were anything but outmanned. Schlein’s group, the Community Financial Services Association, had six lobbyists on the payroll during those months they were debating a payday cap (including Chuck Blasdel, the former state representative who had done the bidding of the subprime mortgage lenders in 2002 and 2006). A group calling itself the Ohio Association of Financial Service Centers had its advocates, as did the individual chains. Cash America, with 139 stores in the state, hired two lobbyists. Rent-A-Center, with fifty-three stores in Ohio offering payday loans, hired four. “You could see it just sitting there,” Faith said. “It’s like each little delegation sitting in the crowd had their own lobbyist.”

In the end, though, the rival lobbying seem to carry less weight than the gathering economic cataclysm that was threatening to engulf the state. The Republicans had already lost the governorship and they were scrambling to maintain their majorities in the Ohio House and Senate. The Speaker of the House, Jon Husted, wanted the party to be on the side of reform. So one day in early April, with the hearings over, Husted held an impromptu press conference with a small gaggle of Columbus reporters.

“I sense growing support for a rate cap in our caucus,” Husted announced. That of course wasn’t what they were hearing or what Widener had been telling them, but the Speaker was sending a message. He wanted to see a rate cap passed and he wanted it to happen quickly.

Strickland, the new governor, also turned up the heat after Bill Faith ran into him in the hallways of the capitol. The two had known each other for years, and when Strickland asked Faith how it was going, Faith told him he could use his help on the payday lending bill. That day Strickland’s staff penned a letter with Faith’s help. “It is my hope,” the governor wrote, that the legislature would approve a 36 percent rate cap and that “I would have the opportunity to sign this policy change into law in the near future.”

That weekend Husted called Widener. He was not about to be out-flanked by a popular new Democratic governor on an issue he had already staked out. Perhaps the simplest solution, Widener suggested, was to take away what the legislature had granted the industry back in 1995, when it exempted these short-term loans from the state’s 28 percent usury cap. That was a cap even lower than the one Strickland had endorsed, which sounded fine to Husted. Twenty-nine Republicans joined forty Democrats to pass the bill by a 69–26 margin. The bill also limited people to four payday loans in a year.

The industry made a last-ditch stand in the senate. They hired more local lobbyists, flew in more troops from out of state, and held a giant rally in front of the statehouse. About two thousand people, most of them payday employees, gathered to listen to speakers and chant, “Save our jobs!”

But it was too late. The day after the rally, the state attorney general released his report on Ohio’s payday lenders. There was “compelling evidence of an industry that uses deceptive practices to target some of the state’s most vulnerable citizens,” Marc Dann wrote. He dismissed payday loans as “a deceptively attractive choice for those in need of quick cash.” Widener’s bill flew through the senate with only minor changes and Governor Strickland signed the bill into law in early June.

The payday lenders, though, would have the last laugh. “It’s a sad day when the opinions of editorial writers and so-called consumer groups count for more than the opinions of the people,” Lynn DeVault said in a statement released on the day Strickland signed the cap into law. The next day, DeVault and her allies did something about this grave injustice when they filed paperwork with the secretary of state’s office indicating their intention to repeal the new rate cap through a statewide referendum. The foes of payday lending would have to win twice, though this time in an expensive statewide ballot fight that seemed well beyond their budget.