Ohio’s new payday loan law goes into effect Saturday. What will change?

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Ohio’s new payday loan law goes into effect Saturday. What will change?

Tony Huang, CEO of Possible Finance, showing the app that customers will use — come Saturday, when the company begins operating in Ohio — to obtain and repay short-term loans.

Under HB 123, the Fairness in Lending Act puts requirements on loans:

COLUMBUS, Ohio – A new short-term loan law that goes into effect Saturday is aimed at ending the cycles of debt Ohioans can get into when a small loan snowballs with fees and interest and becomes impossible to repay.

For the last decade, payday lenders have been operating under a section of state law for credit service organizations, making them brokers — not lenders

Ten companies – some online and some with hundreds of brick-and-mortar stores – are registered with the state to comply with the provisions of House Bill 123, which include fee and interest caps.

However, one payday lender — CheckSmart — announced it is getting out of the loan business and changing its business model to allow another company to sell consumer loans at its stores.

The bipartisan-supported law was signed by then-Gov. John Kasich last summer after over 10 years of consumer advocates battling the payday lending industry in Ohio.

Overseas travel with payday lending representatives was believed to have led to the resignation of Cliff Rosenberger, who had been the Ohio House speaker, amid a federal inquiry that is reportedly ongoing.

Read on to learn about the changes if you or your loved ones are the one-in-10 Ohioans who have taken out a payday loan.

They were using a separate section of law because they said the Ohio General Assembly’s 2008 attempt to make the laws fairer to consumers made it nearly impossible to stay in business.

  • Loans cannot be higher than $1,000. Under the section of law payday lenders use today, they 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.
  • Loan durations 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 that they don’t have $2,500 debt, and stores must make a concerted effort to verify it.
  • Borrowers get 3 business days to change their minds about the loans and return the money, without paying any fees. The right to rescind must be written in a minimum font size of 10 points on loan documents.
  • 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,” as well as the total amount of each payment and number of payments.
  • In boldface, 10-point font, the lender must disclose in loan documents that the fees may be higher than those charged by banks, credit unions and other financial institutions.
  • The lender must disclose in 10-point font that if borrowers have complaints, they may submit them to the Ohio Department of Commerce’s Division of Financial Institutions. The division’s address and phone number must be included.

During the months’ long debate over HB 123, Ohio’s payday lenders have said that stores will shutter and access to credit that low-income Ohioans desperately need will shrink if it became law.

On Thursday afternoon, CheckSmart, which is headquartered in Dublin, announced it will no longer be in the business of selling loans.

Its locations will remain open for other financial services, such as money transmittal, prepaid cards, tax prep and check cashing, according to a statement.

There will https://installmentloansgroup.com/payday-loans-co/ be consumer loans offered at CheckSmart locations, but they will be offered through a partner, Green Bear, LLC, a Utah limited liability company that does business as Crest Line Finance & Green Bear (Ohio) LLC.

“While CheckSmart does not earn any interest, brokerage fees, or other income from these loans, it seeks to promote its ancillary services to this larger customer base,” the Thursday statement said. “Presently, one state-licensed lender is offering a loan in full compliance with the General Loan Law. CheckSmart looks forward to other lenders bringing their products to this marketplace concept to provide consumers with options to fit their credit needs.”

CheckSmart is not offering new loans, but continues to collect from loans already extended to customers, under compliance with state law, it said.

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