The law, which goes into effect April 27, prohibits borrowers from owing more than $2,500 in outstanding principal at a time from multiple payday lenders while continuing to protect them from unscrupulous lending practices. The law limits monthly maintenance fees to either 10 percent of the principal or $30, whichever is less, and caps the overall fees for a loan at 60 percent of the principal, according to a news release from Koehler’s office.
MORE: 1st license issued under payday lending law pushed by Springfield rep
Further licenses will be issued by the Ohio Department of Commerce as applications are processed.
A spokesman for the industry was not able to be reached this week for this article.
Koehler said the new law is to protect consumers.
“Absolutely they’re going to be protected and yes that credit’s going to be available,” he said.
The first license under a new Ohio law that regulates payday lenders was issued in February.
SCIL Inc., which operates Speedy Cash storefronts, was awarded the license under the Short Term Loan Act — a law that resulted from a bill sponsored last year by Koehler.
“One of the biggest arguments against payday lending reform was that if we imposed actual fairness constraints on lenders, they would shut down and leave Ohio. Instead, what we see is the first license being issued in the 11 long years since the legislature first tried to address payday lending,” Koehler said.
Springfield Pastor Carl Ruby was one of the leaders to put payday reform measures on the Ohio ballot. That effort was concluded when the state house passed the new law.
EXTRA: Payday lending debate continues in Ohio
“The problem we were trying to solve was people getting caught in endless cycles of debt. People borrowing one loan after another to pay off the original principal and paying interest of 5-6-7 hundred percent,” Ruby said. “
“Having smaller monthly payments and not being able to take out loans that would take up a third of their income, I think that will be a huge help to people.”
Ohio may be a leader in payday reform. Many states around the country are looking towards Ohio’s new law and contemplating drafting a similar law.
The Springfield News-Sun is committed to covering consumer issues and has provided extensive coverage of efforts to change how payday lenders operate in Ohio.