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The Ohio Fairness in Lending Act A Model for State Payday Reform Sept. 28, 2018

Learn how the Ohio Fairness in Lending Act provides comprehensive protections for payday loan borrowers, including longer loan terms and lower APRs, saving them millions of dollars in fees and interest. This model can be used as a blueprint for payday loan reform in other states.

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The Ohio Fairness in Lending Act A Model for State Payday Reform Sept. 28, 2018

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  1. The Ohio Fairness in Lending ActA Model for State Payday ReformSept. 28, 2018 pewtrusts.org/small-loans

  2. BEFORE Ohio’s payday loan market had the weakest consumer protections in the U.S. • Lenders operate as brokers (partnering with third-party lender), enabling loans without consumer protections included in lending statutes • Most payday loan borrowers use loans repeatedly- national average of 5 months- 83% of Ohio loans taken out within 2 weeks of previous loan • Typical cost in recent years of a $300 loan in Ohio: $68 per 2 weeks / $680 for 5 months 2

  3. BEFORE Ohio residents charged 4X more- same loans, same companies, same borrower risk Cost to borrow $300for 5 months from largest U.S. lenders Nationally, typical borrower is in debt for five months of the year, renewing loan repeatedly. ᵻ

  4. BEFORE Payday loans are not profitable under 2008 law. So lenders offer loans under the MLA and SLA… And also act as loan brokers under the CSOA. 4

  5. Evidence-based approach used to ensure access to credit 5

  6. Polling: overwhelming public support for reform 6

  7. Ohioans for Payday Loan Reform: nonpartisan, statewide coalition Faith voices, veterans, business leaders, borrowers, civil rights groups, local communities 7

  8. Steady drumbeat of media pressure Source: http://www.crainscleveland.com/article/20170319/VOICES01/170319824/crains-editorial-get-it-right 8

  9. Steady drumbeat of media pressure 9

  10. Local support: county resolutions 10

  11. The Ohio Fairness in Lending Act Reforms ensure that short-term lenders operate under the Short- Term Loan Act and… provide simple protections to prevent misuse of traditional installment lending statutes and CSO licenses • Minimum 180-day term • Anti-evasion provisions • Minimum $5000 • Minimum 180-day term • Maximum 28% APR, inclusive of add-on charges 11

  12. Cost to borrow $400 for 3 months AFTER $109 BEFORE $540 12

  13. Payday borrowers overwhelmingly support affordable payments Smaller Payments More Time Amortize Installments www.pewtrusts.org/small-loans 13

  14. Statewide impact BEFORE AFTER The Ohio Fairness in Lending Act will save more than $75 million in fees and interest each year & maintain access to credit. 650+ payday stores statewide 14

  15. Model for Other Payday States 15

  16. More good news: U.S. Bank Simple Loan • First mass-market affordable small-loan program from a bank • Loans of $100-$1,000 available to people who have low credit scores but have an established relationship with the bank • 3-month loans, amortizing, reported to credit bureaus • Payments set at 5% of income • $400 paid back over 3 months costs $48 (less than half of HB123 loan; 7 times lower than average payday loan) • 4th-largest bank in U.S., more than 3,000 branches

  17. $400 for a fee of $60 paid back over 3 months View of a bank that offers this loan Americans Are in Favor of These Small Loans 17

  18. www.pewtrusts.org/small-loans Comprehensive resource for research on payday, auto title, and more Animations Issue Briefs Surveys Reports 18

  19. www.pewtrusts.org/small-loans Project Director: Nick Bourke 202.552.2123 nbourke@pewtrusts.org State Coordinator: Gabe Kravitz 202.540.6944 gkravitz@pewtrusts.org Media Contact: Mark Wolff 202.540.6390 mwolff@pewtrusts.org

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