Login | September 13, 2024
Bill designed to increase access to credit
KEITH ARNOLD
Special to the Legal News
Published: March 12, 2024
Legislation seeking to modernize state laws governing consumer installment lending in the Buckeye State is pending before the Financial Institutions Committee of the Ohio House of Representatives.
The legislation, according to one of the bill’s sponsors, allows local installment lenders to enhance their businesses while maintaining essential consumer protections.
Fort Laramie Rep. Tim Barhorst, a Republican, said House Bill 182 addresses what he characterized as the evolving marketplace of consumer lending, making lending laws consistent with the modern economy.
Upon its enactment, the measure would recognize electronic transactions as new methods of financial transactions to better reflect consumer preference.
“Additionally, this legislation will raise the maximum interest rates lenders under Consumer Installment Loan Act (CILA) can charge from 25 percent to 36 percent to increase access to credit for all Ohioans and support local lenders in our communities,” the lawmaker said.
Under current law, a licensed lender is authorized to make loans to borrowers for a term of at least six months with a maximum interest rate of 25 percent, analysis of the bill provided.
Those loans generally require equal monthly payments and are not secured by the borrower’s residential property.
Barhorst said raising the maximum allowed interest rate was intended to stave off the rising number of out-of-state and foreign institutions that use federal charters to import unregulated interest rates––some of which are north of 150 percent.
“When an installment lender is unable to provide a loan to an individual, the demand does not disappear,” the lawmaker said. “Instead, consumers are forced to seek alternatives that are often more expensive and may lack adequate regulation.”
HB 182 also would provide legal protections to lenders that make an unintentional mistake or oversight that may be corrected promptly.
The bill specifies that any correction must include crediting a loan account with the amount of the overcharge, plus applicable interest on the overcharge, or returning to the customer the amount of any overcharge plus applicable interest on the overcharge on accounts that are closed and have no remaining balance, analysis detailed.
“Under continuing law, similar protections are provided to banks and credit unions,” attorney Carla Napolitano wrote for the Ohio Legislative Service Commission.
Barhorst clarified to committee members during sponsor testimony that those installment loans are distinct from payday or title loans.
“The lenders under CILA are not the ones typically seen in late-night TV promotions or banner advertisements on websites,” he said.
“Instead, they are community partners dedicated to improving the financial well-being of hardworking Ohioans.”
He said increasing access to installment credit in Ohio can empower individuals and families, offering opportunities to build credit histories, repair damaged credit and protect their household wealth.
“Overall, HB 182 ensures that Ohioans can still access safe and affordable credit offered by locally based, Ohio licensed lending institutions,” he said.
Rep. Brett Hillyer, R-Uhrichsville, is the other sponsor of the bill, while two other House members have signed on as co-sponsors.
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