Ohio’s Short-Term Lender Act Law Nothing But Smoke and Mirrors

In Financial, General by Coolidge Wall

After the passing of Ohio’s Short-Term Lender Act in 2008, many felt enough had been done to curb the predatory practices of payday lenders. Proponents of the law explained that its intention was to limit what payday lenders can charge consumers as well as the repercussions available to them if a consumer fails to pay.

However, on Wednesday June 11, 2014, the Ohio Supreme Court ruled in favor of payday lenders in a case involving a two-week loan with more than 235 percent interest. More facts about the case are as follows:

  • On December 5, 2008, Cashland, owned by Ohio Neighborhood Finance, agreed to loan Rodney Scott $500.
  • Rodney Scott, the borrower, would have paid interest of less than six dollars if he’d paid back the loan on time, yet Scott faced higher fees for failing to pay on time.
  • A lower court ruled Ohio lawmakers intended the 2008 Short-Term Lender Act (STLA) to apply to payday loans.
  • Ohio Supreme Court Justices reviewed the law and found that as it is written, it has no such effect.
  • Justice Judith French wrote for the majority, Had the General Assembly intended the STLA to be the sole authority for issuing payday-style loans, it could have defined ‘short-term loan’ more broadly.

This case was closely scrutinized by both lender and consumer groups throughout the state of Ohio. The court’s ruling may well cause lawmakers to revisit and clarify STLA.