H.B. 123 will require lenders to provide loan costs orally and in writing and will give borrowers three days to change their minds.
Bob Miller did what many struggling Ohioans do when faced with a cash crisis: He got a payday loan. Three years ago, after successfully paying off two other short-term loans, the Newark resident decided to get a third, securing $600 from an online lender to cover a car payment.
Miller, however, failed to read the fine print of his loan, which charged him an annual percentage rate around 800 percent. In comparison, a typical credit’s card’s APR is about 12-30 percent. Miller, 53, fell behind. His car was repossessed as his loan’s exorbitant interest rates turned his life upside down. "Who can afford that?" Miller says, sitting in his apartment, which is filled with Ohio State Buckeyes and patriotic decorations. It is tidy and comfortable, though furniture is sparse. He lounges on a loveseat and his dog, Bevo, is large enough to sit on the ground and lay his head on Miller’s leg. "It was so easy to get [the loan], though, because you’re online," Miller says.
Miller found himself in what payday loan opponents call a “debt trap,” monthly payments that suck cash from bank accounts and do nothing to pay off debt. The inherent nature of the payday loan causes the issue. The loan must be paid off by the borrower’s next payday to avoid refinancing charges that are automatically removed from the borrower’s bank account, or cash a predated check each payday, until the full loan amount can be paid at one time. This means a borrower could end up paying far more than the loan is worth—without paying off any portion of the actual loan.
Continue reading Chloe Teasley's story on Columbus CEO.