The Ohio Senate passed House Bill 123 on Tuesday, putting it just a few steps away from completing a tumultuous journey through the legislative process.
The bill was introduced in the spring of 2017 and didn’t make it out of the House of Representatives until June 2018.
When it did so, the bill was passed as introduced due to its connection to the payday lending industry lobbyists and their potential connection to the resignation of former Speaker of the House Cliff Rosenberger, who is under FBI investigation.
Since the bill was sent to the Senate, it has received seven hearings, several of which were dedicated to hearing Senator Matt Huffman’s plans for changing the bill.
Huffman’s changes would have summarily re-written it completely and were constructed with the help of the lending industry’s input.
Monday, when the bill was changed with an amendment, only a few elements of Huffman’s plan were present.
Other lawmakers had worked with Pew Charitable Trusts to adjust the original House Bill with a few tweaks. Only a few elements of Huffman’s plan remain, like the maximum principal a borrower can have at any one time.
Here is a summary of what HB123 will do if signed into law:
Ensuring loans are affordable
- Loans limited to 30-day intervals with a maximum term of 12 months.
- Maximum principal for any loan is $1,000.
- No loans under 90 days unless the monthly payment (monthly share of principal + fees and interest) is not more than 7 percent of a borrower’s monthly net income or 6 percent of their monthly gross income.
- Prohibits a borrower from having more than $2,500 in outstanding principal.
Reducing the cost of loans
- Monthly maintenance fee is the lesser of 10 percent of the original principal or $30.
- The cost of a loan (all fees + 28 percent maximum interest) cannot exceed 60 percent of the loan’s original principal.
- Permits a one-time 2 percent loan origination fee on loans $500 or above in principal.
- Interest is calculated each month on the remaining principal.
Enhancing consumer protections
- Closes the CSO loophole.
- All loans under 90 days are mandated to be affordable.
- For loans 91 days or longer (that is, the borrower failed the means test for a shorter term), the lender must provide the borrower with a sample repayment schedule based on affordability.
- Extends the 24-hour rescission period from the House version to 72 hours.
- Retains the House prohibition on title loans, balloon payments and interest-only loans.
- Limits optional on-site check cashing fees for the loan to a maximum of $10.
- Retains the House requirement that all payments be substantially equal.
- Clarifies that a third party may pay off part or all of a borrower’s loan.
- Prohibits harassing phone calls from lenders.
- Requires the lender to provide information to the borrower both orally and in writing.
The bill passed 21-9. Voting against the bill on the Senate floor were Senators Eklund, Tehar, Hoagland, Coley, McColley, Huffman, Uecker, Jordan and Hackett; all Republicans.
The bill now returns to the House of Representatives for a concurrence vote. If lawmakers in the House agree to the changes the Senate made, the bill will go to the governor for his signature.
The next voting session scheduled for the House is in September, which means it could go into effect early next year if it passes and the governor signs it.
In the meantime, the payday lending industry continues to threaten closing up shop in Ohio.