Because of the success of the law, we have seen fewer calls to Legal Aid by Northeast Ohio residents victimized by predatory lending. And, at its five-year anniversary, newly released data also show the law is working and meeting its goals.
In the years leading up to the passage of the law, six payday loan chains controlled more than 90% of the market. These lenders advertised payday loans as short-term solutions for meeting life emergencies.
Studies showed that typical borrowers were workers with low incomes who struggled to make ends meet and pay recurring monthly expenses. The payday lending industry exploited these borrowers who were in financial distress by taking security interest in the family’s car title or checking account and by structuring loans with unaffordable payments and unrealistic repayment schedules.
Consumers were often caught in a cycle of debt, owing more in fees and interest than the original loan amount.
Today — thanks to the passage of the Ohio Fairness in Lending Act — caps on interest rates and monthly service fees, limits on payments, and the elimination of auto title loans protect Ohioans from the predatory lenders of the past.
By all accounts, the new law is working. An analysis of data collected by the Ohio Department of Commerce shows widespread consumer savings while also preserving access to credit.
According to the statewide data, borrowing $500 for three months in Ohio costs $95 which, on average, saves each borrower $585. Over the first five years of the law’s implementation, that comes to over $300 million saved in interest and fees.
Ohioans still need to be vigilant and take precautions to avoid becoming a victim of a predatory lender.
Despite this celebration of five years of the Ohio Fairness in Lending Act, there are unfulfilled promises for Ohio residents, and we see that in the proliferation of extensive and aggressive marketing of high-cost and high-risk financial products still common through television commercials, direct mail, text messages and other phishing scams.
This five-year anniversary of the Ohio Fairness in Lending Act is a moment for us to look forward – not backward – to continue to protect consumers from the ravages of incurable debt.
Katherine Barr Hollingsworth is the managing attorney of the Economic Justice Team at The Legal Aid Society of Cleveland.
Story can be read at cleveland.com: Ohio’s Fairness in Lending Act made a difference, but vigilance is needed - Katherine Barr Hollingsworth