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Ohio House sends payday loan bill to Gov. John Kasich

July 24, 2018

Ohio House sends payday loan bill to Gov. John Kasich

COLUMBUS, Ohio – A bill reining in payday lending in Ohio cleared its last legislative hurdle Tuesday and is heading to Gov. John Kasich’s desk.

The Ohio House, in a 61 to 24 vote, followed the recommendations of consumer advocates and House Bill 123′s sponsors and voted to agree with changes to the measure made by the Senate.

Kasich, a Republican like the majority in the General Assembly, hasn’t publicly said what he plans to do with the bill. A spokesman said it will be reviewed when they get it. 

The bill will get to his desk in the next several days, at which point he has 10 days to sign or veto it – or allow it to become law without his signature.

The payday loan industry opposes the legislation. It has said many businesses will go under because they won’t be able to operate under the parameters in H.B. 123. They said they assume risk by loaning to people with bad credit.

The General Assembly’s adoption of H.B. 123 comes 16 months after it was introduced. The bill stagnated in a committee for over a year, then was briskly passed. Its passage comes a few months before the Nov. 6 General Election, when many Republican lawmakers are up for re-election.

The bill initially appeared not to be moving out of committee from March 2017 through this spring. Then Cliff Rosenberger resigned as House speaker in April amid an FBI probe into his travels with payday lenders. Rosenberger maintains he’s done nothing wrong.

Shortly after Rosenberger’s departure, H.B. 123 flew out of committee and the House floor without any amendments, unusual for such a controversial measure.

In the Senate, it was amended to be friendlier to payday lenders, although the industry still opposes the bill.

Research by the Pew Charitable Trusts finds the average payday lending APR in Ohio is 591 percent, the nation’s highest. The industry disputes the figure.

The final version of H.B. 123, called the Fairness in Lending Act, does the following:

Limits loans to a maximum of $1,000.Limits loan terms to 12 months.Caps the cost of the loan - fees and interest - to 60 percent of the loan’s original principal. States the interest rate would be no more than 28 percent, aligning with what voters upheld at the polls in 2008.Prohibits loans under 90 days unless the monthly payment is not more than 7 percent of a borrower’s monthly net income or 6 percent of gross income. Prohibits borrowers from carrying more than a $2,500 outstanding principal across several loans. Payday lenders would have to make their best effort to check their commonly available data to figure out where else people might have loans. The bill also authorizes the state to create a database for lenders to consult.Allows lenders to charge a monthly maintenance fee that’s the lesser of 10 percent of the loan’s principal or $30.Requires lenders to provide the consumers with a sample repayment schedule based on affordability for loans that last longer than 90 days, the.Prohibits harassing phone calls from lenders.Requires lenders to provide loan cost information orally and in writing.Gives borrowers 72 hours to change their minds about the loans and return the money, without paying any fees.

After the House voted, the Ohio Consumer Lenders Association released a statement saying a majority of Republicans voted against the interest of companies employing thousands of Ohioans serving more than 1 million customers in the state. 

“House Bill 123 is an untested and unproven attempt to regulate to extinction an industry that is needed by Ohio’s middle class,” the statement said. “Time will show that this legislation is not real reform but an effort to eliminate the existing brick and mortar small dollar loan industry and like ill-conceived attempts of the past, consumers and workers in the industry will be hurt by the implementation of HB 123.”

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