The Ohio Supreme Court held that the Cleveland predatory Lending Ordinance conflicted with state law and is not within the local government’s power. American Financial Services Association v. City of Cleveland, case No. 2006-Ohio 6043 (Ohio Sp. Ct. Nov. 20.2006). The decision reserved the lower court opinion and resolved a conflict among the Ohio appellate courts. The case involved the interplay of state law governing lending, including Sub. H.B. No. 386, enacted in 2002, governing high cost mortgage loans and the Cleveland predatory lending ordinance.

    Under Ohio’s Home Rule Amendment, municipalities may exercise all powers of local self-government and adopt and enforce within their limits such local police, sanitary and other similar regulations as are not in conflict with general laws of the state of Ohio.

    The Ohio Supreme court concluded that Ohio’s predatory lending statutes constitute general laws. The Court held that Cleveland’s ordinances attempt to regulate the making of loans authorized by the General Assembly and thus conflict with the general laws of Ohio. As the Cleveland ordinance seeks to forbid what Ohio law allows the court held that the Cleveland ordinances are unconstitutional.

    This is an important decision for mortgage lenders in Ohio that have faced several years of uncertainty.

    Elizabeth Anstaett and Michael Tomkies