After years of trial and error approaches, there are new attempts at addressing the problem with payday loans in Ohio.

The Consumer Financial Protection Bureau (CFPB) recently released the final version of their Payday Loan rule. So, some Ohio consumers think that positive changes will happen with problematic Payday lending in the Buckeye State. However, the real trouble with Payday loans in Ohio lies within loopholes in current payday lending regulations. The truth is that even if the CFPB rule tightens payday loan restrictions in Ohio, the loopholes will remain. This has prompted the introduction of House Bill 123, which aims to stop lenders from skirting regulations and inflating interest rates.

Unfortunately, the bill proposed by Ohio State Representatives Kyle Koehler and Michael Ashford has not yet received a hearing. Yet, it has much support within a state that has a long history of payday loan problems.

Why there is Such a Big Problem with Payday Loans in Ohio

Payday loan providers are abundant in Ohio. Lenders have shops set up in strip malls throughout the state, and business is booming. In 1943, payday loans were banned, but they were made legal again with the Pay Day Loan Act of 1995. Then, in 2008, the Short-Term Loan Act enforced a 28% interest rate cap on payday loans. The Act also requires a minimum loan term of 31 days, and caps loan amounts at 25% of a borrower’s gross monthly income.

The problem is, however, that payday lenders in Ohio often get around the Short-Term Loan Act by getting licenses to operate as “credit service organizations.” These types of companies can issue loans under the Ohio Mortgage Lending Act and the Ohio Small Loan Act. And, while the loans they issue are effectively payday loans, they don’t fall under the same regulations. So, lenders acting as credit service organizations frequently charge annual percentage rates as high as 591%.

Many Ohio lawmakers and consumer advocacy groups believe that these types of loans catch low-income, poor credit consumers into endless debt traps. Taking out loan after loan does nothing to improve their credit scores or financial situations, so payday loan adversaries want tighter regulations. Of course, House Bill 123 must also address the loopholes in the Short-Term Loan Act, and force all lenders to comply with state-mandated standards for payday loans.

How Ohio Consumers Can Avoid Payday Loans and the Debt Trap

State Reps. Koehler and Ashford want to eliminate payday loan regulation loopholes with House Bill 123. They also aim to limit monthly loan payments to no more than 5% of the borrower’s gross monthly income and limit all fees to $20 per loan. Truly, if the bill passes, Ohio may finally bring all short-term loans under the same umbrella and the same scrutiny. Of course, such strict regulations may make payday loans less accessible to low-income borrowers.

Because of this, opponents of the bill say that it would do more harm than good. Like those who oppose the CFPB payday loan rule, they say that desperate Ohio consumers would turn to riskier sources. This may or may not hold truth. However, even the possibility of such an outcome leads to the conclusion that the real solution to the payday loan problem in Ohio is the end of consumer dependency.

Consumer education, while not an instant fix, is the best strategy for the eventual elimination of payday loans in Ohio. Through budgeting, on-time bill paying, and responsible credit use, consumers can save money for emergency funds and build good credit scores over time. Then, when they need financing for bigger purchases, they can avoid payday loans and seek better options with more competitive terms.

Another Way for Ohio Consumers to Build Good Credit Scores

Building good credit scores can help Ohio consumers in several ways. Not only will it qualify them for payday loan alternatives, but having good credit saves Ohio drivers money on car insurance. In addition, a higher credit score allows you to more easily rent an apartment and secure jobs in certain industries.

Once you make the decision to get better credit, you should check your credit reports. Unfortunately, about 80% of Ohio credit reports contain errors of some type. These inaccuracies often bring down credit scores, so you should find them and have them removed.

To do this, go to and request copies of your credit reports from the three major credit bureaus: TransUnion, Equifax, and Experian. The Fair and Accurate Credit Transactions Act (FACTA) allows you to do this for free once every 12 months.

Then, while looking over your credit reports, if you find mistakes and errors, contact the Law Offices of Gary D. Nitzkin, P.C. When you call our firm (or fill out our convenient contact form), an experienced credit attorney will fix your credit issues and get you clean credit reports – for free.

The Free and Legal way to Get Better Credit

Don’t let errors on your credit reports bring your credit score down. At the Law Offices of Gary D. Nitzkin, P.C., we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? The law allows us to collect our fees and costs from the defendants in any successful action. This is why our clients pay nothing for the work we do.

Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (216) 358-0591 or sending him a message through our contact page.

For more information about Free Credit Repair, please visit