Here in Ohio, April 27 will be a momentous day for supporters of last year’s effort to reform the payday lending industry.
It will be nearly 270 days since HB123 was passed, closing a loophole some lenders were using to get around registering to provide short-term loans.
For the past decade, Ohioans paid a hefty price to borrow from these companies. In some cases, they paid thousands of dollars more than the originally-borrowed amount due to interest and rollover fees that kept low-income earners in a spiral of debt.
That is all supposed to change on Saturday when new rules go into effect. They’re designed to protect Ohioans from that kind of predatory lending.
First, only businesses that register and are certified to provide short-term loans will be able to do so.
The short-term loans themselves will be limited to $1,000 or less.
The length of the loan will be for no more than 12 months.
The loan itself must be amortized and as such, the premise is the consumer’s credit score could be helped as a result of reporting of consistent payment installments.
The fees and interest on the loan will not be allowed to exceed 60% of the amount of money requested.
Finally, if a consumer wishes to pay off the loan within the first 30/60/90 days, the lender will have to run an assessment of the borrower’s ability to meet the agreed upon payment schedule.
If it is determined they do not have the ability to meet that schedule, the loan will have to be taken out for at least 90 days to provide them with a longer amount of time to save up and repay the money.
When the law was being debated at the Statehouse last year, opponents of the bill — lenders — warned that passing it would cause lenders to flee the state, leaving Ohioans without access to credit.
Currently, there are about nine companies that have registered and been certified to offer these new short-term loans in Ohio. An additional nine or so companies are waiting for certifications that are pending and expected to be finalized by the end of next week.
Once that happens, Ohioans will have access to credit at more than 250 brick-and-mortar stores across Ohio.
There is a phone app that has also been granted the ability to operate in Ohio.
Possible Finance is a startup company based out of the Pacific Northwest. It’s been around for a little more than a year.
One of the sponsors of the bill, State Rep. Kyle Koehler, was impressed by the business.
The company reports to credit rating agencies to help its consumers build their credit as they use the service to take out short-term installment loans.
Koehler hopes this becomes the model that will help people with less-than-stellar credit.