Ohio’s new payday loan law is here

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There are about 650 payday loan stores in Ohio, that’s 650 too many in my opinion. But beware 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 agree to abusive terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower does not need, want or cannot afford. www.debt.org/.

A new short-term loan law (House Bill 123) is set to go into effect this month. The goal is to help Ohioans stuck in the cycle of debt when small loans bloat with fees and interest, making repayment difficult. HB 123 closes the exploited loophole while ensuring that borrowers will continue to have access to credit.

“Ohio will definitely have fewer stores offering payday loans, and none should 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 imposes requirements on loans:

Loans cannot exceed $1,000. Under the section of the law, payday lenders currently have no limit on the amount they can lend.

Fees and interest cannot exceed 60% of the original principal of the loan, and the interest rate is capped at 28% per annum.

“If someone borrows $500, they will have to pay a maximum of $300 in fees and interest. Payday lenders have no restrictions today. Loans must be for at least 91 days – with the understanding that consumers need more time than the standard two weeks a payday loan center typically allows for repayment. An exception to this period is if the monthly payment does not exceed 7% of the borrower’s monthly net income, or 6% of gross income,” according to Cleveland.com/.

The duration of the loan cannot exceed one year.

Borrowers cannot have more than $2,500 in principal outstanding on multiple loans. Each borrower must sign a written statement that they are $2,500 debt free, and stores must verify this.

The following provisions have been enshrined in law to assist consumers:

Borrowers have 3 business days to change their mind about the loans and repay the money, without paying any fees.

The borrower should obtain a copy of the terms and conditions of the loan. Total fees and charges must be disclosed “clearly and concisely”. The total amount of each payment and the number of payments must be included.

Lenders can no longer act as consumer service organizations, ending vehicle title lending.

The lender must disclose if the borrowers have any complaints, they can submit them to the Financial Institutions Division of the Ohio Department of Commerce. Address and telephone number must be included.

Harassing phone calls from lenders are prohibited.

According to a 2019 Los Angeles Times article, “California payday lender is reimbursing consumers about $800,000 to settle allegations that it pushed borrowers into high-interest loans and engaged in other illegal practices… Californian 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 Surveillance, which has cracked down on payday loans and other high-cost consumer loans that critics accuse of being predatory. www.latimes.com/.

Let’s applaud. “We are Ohioans for Payday Loan Reform, a group of like-minded Ohioans from the consumer, veteran, business and religious communities, committed to fighting for reforms to protect borrowers and stimulate our state’s economy. Payday loan reform will save hard-working Ohios more than $75 million a year. www.ohiopaydayloanreform.com/.

HB 123 sends the sharks to graze. Congratulations to the Citizens and Legislature of Ohio!

Scope: Melissa Martin, Ph.D, is an author, columnist, educator, and therapist. She lives in Scioto County. www.melissamartinchildrensauthor.com. Contact her at [email protected]

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