Ohio’s Lawmakers Are Pushing for Limitations for the Cash Lending Industry

The recent initiative that was started by Ohio’s House of representatives is a House Bill 123 which was, surprisingly, suggested by republicans. This is a very interesting development for the whole industry as it finds itself under hard pressure from several directions. In Ohio, interest rates are amongst highest in the country. The annual interest may reach a staggering 591% which is a very high even for short-term payday loans.

Various cash loans made credits more accessible to people without bank accounts and helped many American families to quickly fix holes in their budget plans. However, the overall financial illiteracy of an average American led to a big problem that the industry and lawmakers are still trying to crack. People often leap blindly into a debt pitfall without reading carefully terms and conditions.

The new Bill would reduce the upper limit for interest rates to 28% which is still a very nice figure for any business. However, smaller lenders may suffer insurmountable financial losses and go bankrupt. Lawmakers propose to set the cap of interest at $500 as monthly maintenance fees would not exceed $20. Another important detail is that the monthly payment should never exceed 5% of the gross income of an individual.

Consequences of the Bill

The Bill did not pass and will be inspected once again. While the legislative initiative seems to be very good and ensure that borrowers are not trapped into a situation when they only pay for fees and additional charges instead of repaying the main body of the debt. The Bill would make it so the maximum interest rate would be capped at 50%.

This may seem like a very big reduction from the enormous 591%, but an average lender will still manage to earn $50 bucks on each $100 which is a fair deal. Legislators argue that this new change is a necessity rather than an option. Nonetheless, businesses are understandably upset about this affair and want to protect their own interests.

Here is where an interesting part kicks in. The current situation in the industry is far from being absolutely fair, but most Americans still cannot get by without payday loans. In fact, short term cash loans and installment loans are only sources of credit for a very large part of the American society.

There were several stories covered by news channels about people who struggled to pay back. One woman told reporters that after taking a $700 loan she was forced into a debt owing more than $1600 a year later. Another story covers a case with a man was trapped in a similar situation after taking a mere $400 to pay for his utility bills.

The problem, however, is not in the industry. In fact, such  companies help people to find relatively inexpensive short term credits quickly. You have a choice and not forced to use loans from companies that do not offer you attractive lending conditions.

The Bill in its current form can force some smaller lenders out of business and create a void that will be quickly filled by larger corporations that will offer lightly more incentivizing yet less accessible credits leaving a lot of Americans without a source of cash to get out of a pressuring situation like an unexpected malfunction of a car or a medical bill that was way too high.

This Bill does need additional fine tuning. At the same time, businesses and politicians must come together and try to come up with a solution that will satisfy all parties: consumers, the state, and the industry. The middle ground should be somewhere nearby. As of right now, we only can hope that lawmakers will continue to adjust their laws according to economic and social realities.

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