Dann Report on Payday Lending Sent to Ohio Senators Debating Anti-Industry Reform Bill

COLUMBUS, OHIO: Democratic Ohio Attorney General Marc Dann, who has been disowned by his own political party, its leaders and elected officeholders after he confessed last week to an extramarital affair with a female subordinate on his staff and threatened with impeachment by them if he chooses to not resign voluntarily, released findings and transcripts of hearings his agency conducted around the state into payday lending practices to a Senate committee holding hearings on a strict reform bill recently passed by the Ohio House.

Dann, who has said that while he made some very bad hiring decisions and agreed that his own personal conduct contributed to an atmosphere at the agency that gave others a green light to pursue their own course of sexual harassment against other female subordinates in the office, called on Senate lawmakers to approve HB 545, the House-passed version of a reform bill that includes a 26 percent annual rate cap.

“This industry peddles short-term loans that cause long-term financial ruin,’’ said Dann in a media release on the release of his report and its findings. “Too many Ohio families have suffered for too long.’’

The sudden reform version of the bill passed by the House drops the annual interest rate a payday lender can currently charge, 391 percent, to a death defying rate of 28 percent, eight percent lower than the bill the payday lending industry said would put them out of business if approved.

Yesterday was the first hearing of the bill in the Senate Finance and Financial Institutions Committee, chaired by Republican Jon Carey of Wellston. The payday lending industry, which has grown in unit numbers from a modest sum years ago to more than the combined total of fastfood outlets for Wendys, McDonald’s and Burger King, turned out a spectacular army of supporters who rallied outside the Statehouse in Columbus and packed the hearing room.

Dann said that more than 50 witnesses testified at the hearings conducted in Cleveland and Cincinnati in December and in Columbus last month. The witnesses, Dann said, offered “compelling evidence of an industry that uses deceptive practices to target some of the state’s most vulnerable citizens and then traps them into a cycle of repeat borrowing that leads to astronomical fees and insurmountable debt.”

Dann, who said he has done nothing that rises to the level of being impeached, said the “great legal work” his agency is doing is reason enough for him to stay. Functioning essentially as an excommunicated former Democrat, Dann, who as recently as last evening became late-might fodder for Comedy Central’s “The Daily Show,” which is hosted by Jon Stewart and prides itself on its fake news and the real news its based on, said the hearings his agency conducted represented “the first time that Ohio’s Attorney General held public hearings to gauge the effectiveness of the state’s consumer protection laws.”

Whether any of the legislators will listen to Dann now that he has become a persona non grata, has yet to be seen. But despite how his story will play out in the media, with his former elected official colleagues and with Ohio voters and taxpayers who elected him to office in 2006 over a well known and trusted Republican candidate who got thrown out as Ohioans revolted against years of Republican scandals and corruption, the reality of Dann’s recommendations deserve consideration nonetheless.

DEFIANT DANN ISSUES RECOMMENDATIONS

Dann has recommended legislators adopt the following changes:

• Create a database to track payday loans and prevent people from taking out multiple loans at the same time;
• Provide clear prohibitions on abusive debt collection practices and give borrowers and the Attorney General the authority to seek severe sanctions for such practices;
• Limit loan amounts to a percentage of income;
• Limit fees for bounced checks and the number of loans per year, and prohibit any tactics that encourage a cycle of debt;
• Mandate methods to make required disclosures meaningful and understood;
• Reduce the amount of time that the maximum interest rate is in effect;
• Require lenders to offer reasonable repayment plans, including acceptance of partial payments;
• Require financial literacy training for repeat borrowers; and
• Work with the National Credit Union Administration to use public service announcements and other means to publicize the dangers of payday loans and promote alternatives.

DANN CHALLENGES INDUSTRY TALKING POINTS

The hearing transcripts Dann released today took on the claims of the payday lending industry.

Industry representatives said their business model does not depend on repeat borrowing.

“In Cleveland, Dann said one witness told of his extraordinary efforts to stop repeated loans to a family member who was diagnosed with a spending addiction. Many payday shops continued to make loans, even after receiving registered letters from the woman’s psychiatrist. “Their late fees and interest charges are not manageable for even wealthy people,’’ he said. “All we have done is legalize loan sharking.”

Industry representatives insisted they do not encourage abusive collection tactics.

“In Cincinnati, Nick DiNardo, managing director of the Homeowner and Consumer Practice Group, Legal Aid Society of Southwest Ohio disagreed, telling the panel, “The dissatisfaction rate of the collection tactics of payday lenders is 100 percent.” Tactics include threatening or harassing the borrower’s employer, making late night or early morning calls to the borrower or intentionally cashing the postdated check when there are insufficient funds to cover it, hoping the late fees will pressure the borrower to take out a second, larger loan.

Industry representatives boasted that they had compiled a list of Best Practices for lenders to follow and those practices include truth-in-lending and a ban on rollover loans.

“In Columbus however, former employees said company policies often were ignored because of a bonus system dependent on the volume of customers served and the number of loans processed. “Honestly, the policy manual of the company I worked for was good,’’ former employee Tom Kirk testified. “The problem is that the district manager and the store managers and the store personnel don’t always follow it.”

CAN DANN BE THE MAN (AGAIN)?

Even as the chorus of voices calling for him to resign grew ever louder in the five days since he laid himself bare before the media last Friday, Dann can count on one hand those who have not called for him to step down immediately, as have Gov. Ted Strickland, two other Democratic statewide officeholders. both leaders of the minority caucuses and Ohio's junior US Senator, who affixed their signatures to a letter calling on the Youngstown resident to do what's best for him, his political party and the people of Ohio.

The Dayton Daily News reported that Dann's step-father thinks what's happened to his son-in-law so far is nothing but "piling on" and says he, his daughter, Dann's Wife, their children and other friends, think Dann should stick it out and not capitulate to what he said was a "rush to judgment" by those who seem dead set on unleashing the impeachment clause of the Ohio Constitution, which has only been used twice, on him.

The firm Dann hired, Stanford Campaigns and Stanford Research, has the catch slogan of "We Serve Republicans. Would You Like Them Skewered, Roasted, or Deep Fried?" The firm will be paid from campaign funds, according to the report, which quoted it leader, Jason Stanford, saying of how he came to be hired by Dann, "We have friends in common. Private friends. People he trusts, trust me."

Meanwhile, at the Statehouse across the street from the AG's office, the blades of impeachment are being sharpened. Republican House Speaker Jon Husted of Dayton has called on a long-time member and former judge to research reviving Ohio's impeachment clause. Husted and his designated hangman, Bill Batchelder, 65, of Medina, both say impeachment is serious business, not to be taken lightly.

Writing for the Dayton Paper, Bill Hershey had Batchelder's take on his task: "I've only been here (in the House) 32 years. This will be the highlight of what I ever do if we go forward."

No elected official has been impeached since 1820 and no attorney general, governor or other constitutional officer ever has been impeached, Batchelder said, according to Hershey.

About the author

John Michael Spinelli is a former Ohio State