Ohio Loophole Could Hold Back New Payday Lending Rules
New rules issued this past week by the federal Consumer Financial Protection Bureau are meant to rein in payday and auto title lenders. The rules require enhanced credit checks for some loans and cooling off periods after three loans in a row to a single borrower.
But they might not have much of an effect in Ohio.
Researcher Alex Horowitz says that’s because of the laws regulating the companies here.
“In Ohio, payday and auto title lenders are not operating under the intended statute,” Horowitz says. “They’re using a loophole that lets them operate as loan brokers. That’s why they can charge interest rates in excess of 400 and 500 percent and that’s also why they can evade the federal protections issued yesterday.”
A 2008 law capped yearly interest rates at 28 percent. But the Ohio Supreme Court has upheld the loophole used by lenders.
Legislation currently in front of the state assembly is meant to close it. Horowitz says right now the new federal rules aren’t likely to help lower costs in Ohio.