COLUMBUS, Ohio – Gov. John Kasich signed a bill on Monday that promises to save millions of Ohio consumers in interest rates and payday loan fees.
House Bill 123 will come into effect at the end of October.
The Fairness in Lending Act will close a loophole that payday lenders have used to bypass the state’s 28% APR on loans. According to the Pew Charitable Trusts, Ohio’s average rate is 591%, a figure disputed by the industry.
The law also:
- Limits loans to a maximum of $ 1,000.
- Limits the duration of the loan to 12 months.
- Cap the cost of the loan – fees and interest – at 60% of the original loan principal.
- Prohibits loans of less than 90 days unless the monthly payment does not exceed 7% of the borrower’s monthly net income or 6% of gross income.
- Prohibits borrowers from carrying over $ 2,500 in outstanding principal on multiple loans. Payday lenders should do their best to check their commonly available data to determine where other people might have loans. The bill also authorizes the state to create a database that lenders can consult.
- Allows lenders to charge a monthly maintenance fee equal to the lesser of 10% of loan principal or $ 30.
- Requires lenders to provide consumers with a sample repayment schedule based on affordability of loans that last longer than 90 days on.
- Prohibited from harassing phone calls from lenders.
- Requires lenders to provide loan cost information orally and in writing.
- Gives borrowers 72 hours to change their mind about loans and pay off the money, no fees.
Kasich’s signing is no surprise. The Republican indicated last week that he would sign it.
At least one state legislator considers part of the bill to be unconstitutional. On Monday afternoon, the industry – the Ohio Consumer Lenders Association – said it was still exploring its options.
In 2008, the last time Ohio attempted to reform payday loans, the industry took the issue to the polls in an attempt to secure a referendum, but failed.
“We still believe this bill will not serve Ohio consumers,” said association spokesperson Pat Crowley. “We are exploring all of our options right now because our customers want them. “
A bipartisan coalition of religious and civic leaders, the Ohioans for Payday Loan Reform, criticized the bill and pushed for its passage.
HB 123 was introduced in March 2017 and stagnated in committee for over a year. Then President Cliff Rosenberger resigned from Ohio House amid an FBI investigation into his trip with the industry. Then the bill was kicked out of the House and Senate months before the November election.