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No More Payday Loans In Ohio

seal of ohioIn July 2018 the Ohio legislature passed Bill 123 intended to curve the fees charged by companies that offer Payday loans and Title Loans.  This bill was then signed by Governor John Kasich.  As to when this bill will become effective, I can only guess January 1st of 2019.  The bill mostly addresses the Ohio Short-Term Loan Act with adjustments to that existing law.  However, it also tweaks the Second Mortgage Loan Act and the law regarding Credit Services Organizations.  Although we would not advocate cash advance loans as the best financial option, we do disagree with most of the news sources which are declaring this a victory for consumers and how much money it will save consumers.

Will it really save consumers money?  A little background first.

Short term loans have been around long before the Ohio legislature agreed to approve licenses for lenders to provide payday loans.  Before the regulated Payday loan laws in Ohio, if a person needed some cash and didn’t have a friend or relative to help or a bank to approve him for a loan, then that person could choose to not pay the bill or borrow money from an unregulated and/or untaxed entity or individual.  One of the underlying reasons for the state of Ohio providing payday lending licenses was that it provided the state with the means to tax short term loans that were already being used by the public.  Another reason is that it provided the consumer with a way to access short term loans from safe and regulated lenders or entities.  So, licensing lenders to provide cash advances or short term loans never had to do with it being the best financial option or the cheapest option out there.  It was just a practical thing to do Payday neonconsidering that consumers were already using this type of product with or without the blessing of the government. 

 

 

Will it really save money for consumers?

The reason for the claim that the new law will save consumers money is that lenders will have to charge much less for short-term loans, if they want to offer such a product at all.  Payday lenders right now charge APR’s in the triple digits.  Under this bill they are limited to an APR of 28%.  Hurray for consumers right?  But consider what is being expected from lenders.  To go from charging a triple digit APR’s to a 28% APR and, yet, remain in business, is unrealistic.  The claim that consumers will save money under this new bill is “true.”  But, not for the reason the news media would like to have us believe.  The reason that consumers will save money under the new law is because there will be very few lenders offering short-term loans in Ohio.  So, this is how consumers will save money: with no supply of credit in the form of short-term loans, consumers can not borrow, consumers don’t owe that debt, and, therefore, yes, they will save money.  But this may come at the expense of many consumer not paying some bills or expenses.  Those few lenders who remain offering payday loans will, in my opinion, be the ones for which such loans are a side business.  Furthermore, those types of lenders will be forced to be much more picky as to whom they loan.  A 28% APR is not leave much to make up for loses related to serving consumers with bad credit.  Therefore, lenders will take less risks in lending to people who have bad credit.  loan shark My fear, and we are not endorsing payday loans as the best option out there, is that this “heavy handed” approach that the Ohio Legislature has taken will only lead consumers to borrow money from unregulated individuals and entities. 

Need Money, But, Not A Payday Loan?

If you have bad credit and need a loan, America’s Loan Company may be able to help with an affordable Personal Loan.  Although approval is not personal loan chalkboard 480x360guaranteed, we may be able to help even if you have bad credit.  We can lend as little as $500.00, if that’s all you need, with a term of 6 months to a year.  Our loans are always made to fit your budget and help to not get you into a cycle a debt, as may happen if you get the typical payday loan or title loan.  You may apply at our website, www.americasloancompany.com, or by coming to any of our offices in Ohio.  We also report your loan payment history to TransUnion to help you improve your credit.

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