Financial News

Ohio New Payday Loan Legislation are Here

EPF Last Update: May 28, 2020

The Fairness in Lending Act – signed into state law by former Ohio Governor John Kasich – is estimated to save borrowers upwards of 75 million in interest and fees per year. Designed to help vulnerable borrowers avoid predatory debt traps, House Bill 123 took effect on Saturday, April 27, with more than 200 Ohio storefronts and online lenders currently registered under the new law.

What are The Ohio New Rules?

Parsing through the details, the new act prohibits loan amounts from exceeding $1,000 per borrower. It also prohibits borrowers from carrying more than $2,500 in total debt across several loans. Annual interest rates are capped at 28% and loan duration must range from a minimum of 91 days to a maximum of one year. For lenders to issue loans with duration of less than 91 days, a borrower’s monthly payment cannot exceed 6% of their gross income or 7% of their net income. The most important feature of the new legislation is that total interest and fees are capped at 60% of a loans principal. This means if you take out a loan of $1,000, the maximum you can pay in interest and fees is $600.

As it relates to monthly maintenance fees, lenders can only charge the lesser of 10% of a loans principal or $30. As well, borrowers have the option to rescind or cancel a loan—without fee or penalty – as long as they return the principal within three business days. Under the new collections policy, lenders are also prohibited from debiting a borrower’s bank account more than two times unless the borrower provides written authorization.

Clearly presented at each storefront, licensed lenders are also required to post in a minimum of size 10 font: “WARNING: The cost of this loan is higher than the average cost charged by financial institutions, such as banks or credit unions, on substantially similar loans. A financial institution may be able to offer you a similar loan at a lower cost.”

Lenders are also required to post a written statement outlining “complaints regarding the loan or lender may be submitted to the department of commerce division of financial institutions” and include the correct telephone number and mailing address for the department.

Recommended Articles

Debt

Over 70% of The People with Payday Loans Could Qualify for Refinance

EPF September 29, 2020

You are with relatively low credit. You don’t have enough money. You’ve heard that you can’t get a personal loan. And you go and get a payday loan. A common scenario… You are not the only one who do this...

Debt

Credit Report Changes in 2020 Could Hurt Your FICO Score

EPF July 8, 2020

FICO 10 T includes another round of changes to how FICO calculates your credit score. It focuses primarily on debt levels during the past two years. If your total debt during the past 24 months is on the upswing or...

AS SEEN ON