Ohio Payday Loan Law and Legislation

Ohio used to be is a tricky place when it comes to payday loans. They were excessively expensive with APR reaching up to 677%* until October 2018, when Ohio changed its regulations for payday loans.

For a long time, Ohio used to be one of the most expensive states to take a payday loan. The reason lay in the nature of Ohio payday loan regulations and the fact that payday lenders could register as mortgage lenders (they were allowed to do so according to Ohio’s Mortgage Lending Act (MLA), and by doing so they could get around the law. Thus, they were not obliged to follow any strict payday loan regulations and could charge whatever interest they wanted.

The fun ended in 2018, however, and this time, it looks like lawmakers are serious about forcing short-term lenders to comply with the 28% APR cap.

Ohio Payday Lending Statutes

It is legal to get payday loans in Ohio according to (Ohio Rev. Code Ann. 1321.35 et seq.).

• All lenders wishing to operate in Ohio are required to obtain a Short-Term Loan Law license.
• Online lenders (in- and out-of-state) can also obtain Ohio Short-Term Loan Law license and extend their loans in the state. Now, the Short-Term Loan Act requirements are obligatory for all lenders, regardless of the origination channel (online lenders including).

Loan Amount in Ohio

Rates, Fees and Other Charges in Ohio

• Ohio does not allow APR in excess of 28%.

Under 15 U.S.C. §,1606 interest may be calculated so long as it does not exceed an APR of 28%. (Ohio Rev. Code Ann. 1321.35 et seq.)

Until recently, however, APR for payday loans could reach 677% (According to the Center for Responsible Lending 2019)

• Now, the cost of the loan (including the fees and interest) can’t exceed 60% of the loan’s original principal. 
• Lenders can charge a monthly maintenance fee that’s the lesser of 10% of the loan’s principal or $30.
• 2% loan origination charge is allowed for a loan of $500 and more; no interest is charged on the loan origination charge.
• An ability-to-repay (ATR) requirement must be complied with by a lender in case of loans under 90 days. In such cases, a monthly payment should not exceed 7$ of a borrower’s monthly net income or 6$ of gross income, whichever is greater.

The Maximum Term for a Payday Loan in Ohio

• The loans are given for a period from 91 days to 1 year.
• Rollovers are not allowed in Ohio.

Consumer Information

Attention
From July 2020, lenders are not required to check a borrower’s ability to repay a loan.
Be careful, evaluate your financial situation, don’t get into a debt trap.
The rule was changed by the CFPB.

• It is now prohibited for a borrower to carry more than a $2,500 outstanding principal across several loans.
• Criminal charges are prohibited in the state of Ohio.
• Licensed lenders may not charge or receive monthly maintenance fees from the customer if the person is an active duty member of the United States armed forces, or if they are a dependent of an active member of the armed forces. This is in keeping with Ohio Rev. Code Ann. 1321.35 et seq.

In case of any assistance in regard to payday loans or other lending issues, one can contact the Ohio Division of Financial Institutions.

Regulator: Complaints & Information

Ohio Division of Financial Institutions

Address: 77 S High St, 21st Floor, Columbus, OH 43215
Phone: 614-728-8400
Fax: 614-728-0380
Url: https://www.com.ohio.gov/fiin/
File a Complaint: https://www.com.ohio.gov/fiin/Depositorycomplaintprocess.aspx

Submit a Complaint to the CFPB

Number of Ohio Consumers Complaints by Topics

According to CFPB Consumer Complaint Database

• Fraud and threat ( 492 )
• Charges from account ( 269 )
• Not exiting debt ( 171 )
• Loan to return ( 129 )
• Credit rating ( 103 )
• Not requested loan ( 81 )
• Lender is not available ( 72 )
• Loan not received ( 21 )

The Quantity of Top Ohio Stores by Cities

The History of Payday Loans in Ohio

• Before the 1990s – Ohio law prohibited payday loans for more than 50 years.
• 1995 – The Pay Day Loan Act was approved by the Legislature in Ohio; it presupposed state licensing of payday lenders and also exempted payday lenders from the state’s usury laws. Payday lending stores opened for business in Ohio and soon the industry grew and flourished charging triple-digit ARP.
• 1997 – Some banks, e.g. Wells Fargo, started offering expensive “deposit advance” loans against the next paychecks of the customers.
• 2000 – Ohio prohibited any court actions against customers where payday lenders could use the Civil Damages for Crime Victims law.
• Lenders were requested to disclose all the loan terms (APR, primarily) under the Truth in Lending Act. The measure was actively opposed by the lenders.
• 2002 – 2004 – A rent-a-bank scheme was very popular, however, finally, the FDIC put a stop to bank-payday partnerships.
• 2004 – The rise of Internet loans (as a new way to evade state usury laws). (Clevelend.com)
• 2007 – The number of a payday loan stores was raised from 107 (in the 1996 year) to 1638 locations.
• 2008 – Ohio enacted the Short-Term Lender Law (“STLA”). The Ohio Short-Term Loan Act capped the interest at 28% and imposed a $500 restriction on payday loans.
  • However, due to the possibility for payday lenders to register as mortgage lenders under Ohio’s Mortgage Lending Act (MLA) no lenders obtained licenses under the Short-Term Loan Act.
  • MLA has a 25% interest rate cap, but none of the other STLA restrictions. Here, payday lenders managed to evade the regulations again, this time by registering as credit services organizations (according to the newly-created Credit Service Organizations Act). Hence, the exorbitant interest rates, again.
• June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
• October 29, 2018 – Finally, Ohio enacted the Fairness in Lending Act. It requires all nonbank lenders to obtain a Short-Term Loan Law license, caps APR at 28% and sets a maximum loan amount of $1,000.
• Now lenders registered as Credit Services Organizations are prohibited from giving loans of less than $5,000 and exceeding the APR of 28%.
• The law became effective October 29, 2018; lenders must comply with its provisions on April 27, 2019.
• The question is whether this measure can unintendedly shift the focus to other industries favored by unbanked and underbanked people, for instance, to pawnbrokers, and how much of a headache similar to payday loans it will be.

[Updated As of February 2020]