In a surprise move, the Ohio House of Representatives passed Ohio H.B. No. 545 capping the APR on “payday” loans at 28% Wednesday. The bill provides that the 28% must include all fees or charges paid by the borrower. Several bills that would revise Ohio’s payday loan law, referred to as the Check Cashing Lender Law, had been discussed in the House since last fall. Ohio H.B. No. 545 was introduced on Tuesday April 29, 2008 and passed the House on Wednesday April 30, 2008 by a vote of 68 to 26. The bill now heads to the Senate.

    Ohio H.B. No. 545 repeals Ohio’s current payday loan law in its entirety and enacts new provisions in the existing Ohio Small Loan Act providing for new “short term lender” loans. Under the bill, short term lender loans may not exceed $500 and may not have a duration of less than 31 days. The loan amount may not exceed 25% of the borrower’s gross monthly income. The bill imposes new debt collection requirements on short term lenders similar to those found in the federal Fair Debt Collection Practices Act. The bill prohibits short term lender loans from being made over the internet. The bill makes Ohio’s Consumer Sales Practices Act applicable to short term lenders.

    The bill requires the Superintendent of Financial Institutions to create a statewide database of loans made by short term lenders and limits the number of such loans to any borrower to four per year. The bill provides that a violation of the short term lender provisions is a violation of the Ohio Consumer Sales Practices Act.

    The House passed the bill despite testimony that the bill will result in the death of the payday lending industry in Ohio and result in the loss of 6,000 jobs. The bill could be considered by the Ohio Senate as early as next week.

    The politicization of this issue probably means the end of payday lending in Ohio unless the industry develops an entirely new approach to lending in Ohio. And time is of the essence.

    Please contact us with any questions or if you would like a copy of Ohio H.B. No. 545.

    Elizabeth Anstaett and Darrell Dreher