What Happens When You Default on a Payday Loan in Ohio?

by Bethany Eanes ; Updated July 27, 2017
Ohio regulates pay day lenders.

Ohio is one of the 24 states that permits pay day lending. This means the institution of pay day lending, also known as cash advance lending, is regulated by a state board. All pay day lenders must register with the state and uphold the state laws to stay in business. These laws govern how a default must be handled. In Ohio, the law requires a 60-day repayment plan with no fees in the case of a default.

Pay Day Loan Licensing in Ohio

To be a licensed pay day lender in Ohio, a company must show financial responsibility in the past, experience in lending, a fit balance sheet and a net worth over $100,000. In general, it is very favorable to a consumer when pay day lending is legalized and regulated in a state. In states where pay day loan businesses are not legal, there is a great deal of pay day loan fraud. As an Ohio resident, you have a greater assurance your pay day lender is operating within the law if the lender is licensed.

Pay Day Loan Fees in Ohio

Interest fees are capped at 28% annually in Ohio. This interest is assessed on a one-time, monthly computed basis. Since the interest does not compound, the borrower will never be assessed greater than 28% interest on the loan. Origination fees may be charged in addition to the interest fees. If your lender broke any of these regulations before the time you defaulted, you may be entitled to complete absolution of the debt.

Pay Day Loan Default in Ohio

Eight states, including Ohio, require installment repayment options for borrowers in default on a pay day loan. In Ohio, the law grants a 60-day grace period if you are in default. There can be no additional fees in this period. After that period, you may be subject to a $20 collection charge on the fees. If the lender must file a lawsuit to recover, you may have to pay court costs and damages to the lender.

Pay Day Loan Traps

Some less ethical pay day lenders may talk borrowers into taking a new loan to pay of an existing debt. This leads to a debt cycle often referred to as a loan trap or loan scam. Pay day lenders in Ohio are restricted from making more than one loan at a time, and they cannot make more than four loans a year to a pay day borrower. Therefore, it is illegal for the lender to offer you a new loan to pay off your existing debt. If this occurs, you can contact the Ohio Division of Financial Institutions.

Getting Out of Pay Day Loan Debt

If you find yourself in pay day loan debt, the best plan is to attempt to repay the debt within the 60-day, no-charge period. After this period, if you cannot repay, you should contact your lender and financial advisers immediately. Waiting for the lender to file a lawsuit will only result in greater charges. Since lenders are most interested in collecting the money owed, your lender may be willing to extend you a longer payment plan to help you repay the debt.

About the Author

Based in Los Angeles, California, Bethany Eanes began her career in 2006. She specializes in legal, financial, and fitness writing, with publications on DUIAttorney.com and in local papers like "The Daily Breeze." Eanes earned a Bachelor of Science in history with focuses in humanities ad writing from Washington University.

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