There are about 650 payday lending stores in Ohio—that’s 650 too many in my opinion. But lookout lenders!
“Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn’t need, doesn’t want or can’t afford.” www.debt.org/.
A new short-term loan law (House Bill 123) is ready to go in effect this month. The purpose is help Ohioans stuck in the cycle of debt when small loans balloon with fees and interest—making payback difficult. HB 123 closes the exploited loophole while ensuring that borrowers will continue to have access to credit.
“Ohio definitely will have fewer stores offering payday loans, and none is expected to offer vehicle title loans” according to a 2019 article in the Columbus Dispatch.
Under HB 123 (www.legislature.ohio.gov.), the Fairness in Lending Act puts requirements on loans:
Loans cannot be higher than $1,000. Under the section of law payday lenders currently have no limits on how much they can loan.
Fees and interest cannot exceed 60 percent of the loan’s original principal, and the interest rate is capped at 28 percent a year.
“If someone borrows $500, they would have to pay at a maximum $300 in fees and interest. Payday lenders have no restrictions today. Loans must be for at least 91 days — with the idea that consumers need more time than the standard two weeks a payday loan center usually allows for repayment. An exception to this time period is if the monthly payment is not more than 7 percent of a borrower’s monthly net income, or 6 percent of gross income” according to Cleveland.com/.
Loan duration can’t be more than a year.
Borrowers cannot have more than $2,500 in outstanding principals across several loans. Each borrower has to sign a written declaration stating they don’t have $2,500 debt, and stores must verify it.
The following provisions were written into the law to help consumers:
Borrowers get 3 business days to change their minds about the loans and return the money, without paying any fees.
The borrower must get a copy of the loan’s terms and conditions. Total fees and charges need to be disclosed in “a clear and concise manner.” The total amount of each payment and number of payments must be included.
Lenders can no longer act as consumer service organizations, ending vehicle title loans.
The lender must disclose if borrowers have complaints, they may submit them to the Ohio Department of Commerce’s Division of Financial Institutions. The address and phone number must be included.
Harassing phone calls from lenders are prohibited.
According to a 2019 article in the Los Angeles Times, “A California payday lender is refunding about $800,000 to consumers to settle allegations that it steered borrowers into high-interest loans and engaged in other illegal practices…California Check Cashing Stores also agreed to pay $105,000 in penalties and other costs in a consent order with the state’s Department of Business Oversight, which has been cracking down on payday and other high-cost consumer loans that critics allege are predatory. www.latimes.com/.
Let’s applaud. “We are Ohioans for Payday Loan Reform, a group of like-minded Ohioans from the consumer, veterans, business, and faith communities committed to fighting for reforms to protect borrowers and boost our state’s economy. Payday loan reform will save hard-working Ohioans more than $75 million a year.” www.ohiopaydayloanreform.com/.
HB 123 is sending the sharks packing. Kudos to Ohio citizens and legislature!
Melissa Martin, Ph.D., is an author, columnist, educator, and therapist. She lives in Southern Ohio.
