Ohio New Payday Loan Legislation are Here

ElitePersonalFinance
Last Update: January 17, 2021 Financial News

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 a duration of fewer than 91 days, a borrower’s monthly payment cannot exceed 6% of their gross income or 7% of their net income. The new legislation’s most important feature is that the total interests and fees are capped at 60% of the loan’s principal. This means if you take out a loan of $1,000, the maximum you can pay in interest and fees is $600.

Regarding monthly maintenance fees, lenders can only charge less than 10% of a loan’s 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 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.

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