Ohio HB 123: Loan Caps, Repayment Rules, and Disclosures

The Virginia Fairness in Lending Act caps annual interest at 36 percent on short-term loans, motor vehicle title loans, and consumer finance loans, limits the fees a lender can add on top, bans balloon payments, restricts how many small-dollar loans you can carry at once, and gives you a direct line to state regulators if a lender breaks the rules.¹ Signed into law on April 22, 2020, it rewrote three separate chapters of the Virginia Code and brought payday-style lending under consistent standards.

Which Loans Are Covered

The act reaches three product categories, each governed by its own chapter of the Virginia Code. The rules differ in the details, so knowing which chapter applies to your loan matters.

Short-term loans under Chapter 18. These are the products formerly marketed as payday loans: unsecured loans up to $2,500 with repayment terms of four to 24 months.²
Motor vehicle title loans under Chapter 22. These are loans secured by your car title, with the lender holding the title as collateral rather than taking the vehicle.³
Consumer finance loans under Chapter 15. These are installment loans from $300 to $35,000, with repayment terms of six to 120 months.⁴

All three categories share the 36 percent annual interest ceiling. Fee rules and repayment structures are tailored to each.

What a Short-Term Loan Can Cost

Interest on a short-term loan is a simple annual rate capped at 36 percent, calculated only on the unpaid principal balance. The lender may also charge a monthly maintenance fee, but it cannot exceed the lesser of 8 percent of the original loan amount or $25.⁵ On a $250 loan, that works out to $20 a month, not $25. The maintenance fee cannot be added to the loan balance to accrue interest.

Two other charges are permitted: up to $25 if a check or electronic payment bounces, and a late charge of up to $20.⁵ Anything else, including origination fees, application fees, or processing fees, is not allowed on a short-term loan.

There is also a hard ceiling on total cost. For a loan of $1,500 or less, total fees and charges over the life of the loan cannot exceed 50 percent of the original loan amount. Above $1,500, the ceiling is 60 percent.⁶ That backstop keeps a long string of allowable monthly fees from stacking up into an unreasonable total.

What a Title Loan Can Cost

Title loans carry the same 36 percent annual interest cap. The maintenance fee ceiling is lower: the lesser of 8 percent of the original loan amount or $15 per month. Late charges max out at $20 and bounced-payment fees at $25.⁷

If the lender repossesses your vehicle, interest stops accruing on the date of repossession. If you simply stop paying without surrendering the car, interest stops 60 days after the missed payment, unless you’re actively hiding the vehicle. Repossession and sale costs are capped at 5 percent of the original loan amount, and the lender cannot pass storage fees on to you at all.⁷ If a lender or repo company overcharges you, you can recover the excess by presenting a valid receipt.

Consumer Finance Installment Loans

Consumer finance companies making installment loans between $300 and $35,000 are also held to the 36 percent cap. Interest cannot be compounded or charged on an add-on basis. It accrues only on the unpaid principal. The loan must be structured into at least six substantially equal payments over a term of six to 120 months.⁴

Unlike short-term loans, Chapter 15 loans allow a one-time processing fee: the greater of $50 or 6 percent of the principal, capped at $150. There is no recurring monthly maintenance fee.⁴

Repayment Protections

A short-term loan must run at least four months and no longer than 24. Every payment must be substantially equal and must reduce the principal.² Interest-only payments followed by a lump-sum balloon are prohibited. Title loans follow the same substantially-equal-installment rule, and a title loan agreement cannot be extended, renewed, or refinanced.⁷

Short-term loans can be refinanced into a new short-term loan, but the lender has to refund a prorated share of fees based on days remaining in the original term. You can make partial payments of $5 or more at any time, and you can prepay in full without penalty. On prepayment or refinance, the lender must refund the unearned portion of all fees except the late charge and bounced-payment fee.⁸

One Loan at a Time, and Limits on Bank Withdrawals

You cannot have more than one short-term loan outstanding at a time from any licensed lender. A lender is prohibited from refinancing, renewing, or issuing a new short-term loan that would put you over that limit.⁹ You also cannot take out a short-term loan while you have a title loan outstanding.¹⁰

After two consecutive failed attempts to withdraw a payment from your bank account electronically, the lender has to stop trying unless you give new written authorization.⁹ That rule exists to stop the cascading overdraft fees that happen when a lender hammers an empty account. A federal rule from the Consumer Financial Protection Bureau applies the same two-attempt limit to covered lenders nationwide.¹¹

Lenders also cannot make a loan to help you pay off another loan from the same lender or an affiliate, and they cannot make a loan to buy products sold at their own location.⁹

Disclosures and Your Right to Cancel

Before you sign, the lender must give you a written contract listing the principal, the total fees you will pay, the amount and due date of every payment, the annual percentage rate, and the maturity date. The contract has to include the federal Truth in Lending Act disclosures.¹² Because the maintenance fee generally counts as a finance charge when required as a condition of the loan, the disclosed APR on your contract will usually read higher than 36 percent once fees are folded in.

You can cancel the loan by returning the proceeds by 5 p.m. on the third business day after signing. The contract must spell out this rescission right in at least 10-point type, and the lender has to hand you a plain-language pamphlet with a toll-free number for the State Corporation Commission.¹²

Electronic payment authorization is optional. You can revoke it at any time, and the contract has to say so. A lender that insists on automatic withdrawals as a condition of the loan is violating the law.¹²

Credit Reporting

The act does not require short-term lenders to report your payments to the three major credit bureaus, and most do not. Paying on time will probably not help your credit score.¹³ A default is different: if the debt goes to collections or ends up in a lawsuit, the collector or the lender may report it, and your score can drop even though the loan was never reported while it was current.

How to File a Complaint

If a lender is charging more than the law allows, refusing to refund prorated fees on prepayment, running repeated electronic withdrawals after two failures, or issuing a second loan while one is already outstanding, you can file a complaint with the Bureau of Financial Institutions at the Virginia State Corporation Commission.¹⁴

Pull together your loan contract, a record of every payment you’ve made, and documentation of the specific violation. Bank statements showing unauthorized withdrawal attempts are especially useful. The Bureau provides an online complaint form; when you file, you authorize the Bureau to share your complaint with the lender and request a response. Keep account numbers and personal financial details out of the complaint itself.¹⁴

The Bureau reviews the complaint for jurisdiction, forwards it to the lender, reviews the response, and tells you the outcome. Plan on 30 to 45 days, longer for complex matters.¹⁵ Virginia law provides civil and criminal penalties against lenders who violate Chapter 18, and borrowers may have a private right of action for loans that don’t comply with the statute.

You can also file with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint or by calling (855) 411-2372. The CFPB publishes company responses in a public database, which can push a lender to resolve the issue.¹⁶

1
Virginia General Assembly. Virginia Code – Chapter 1258
2
Virginia General Assembly. HB 789 Consumer Lending Summary
3
Virginia Code Commission. Virginia Code 6.2-2200 – Definitions
4
Virginia Code Commission. Virginia Code 6.2-1520 – Rate of Interest; Late Charges; Processing Fees
5
Virginia Code Commission. Virginia Code 6.2-1817 – Authorized Fees and Charges
6
Virginia Code Commission. Virginia Code Chapter 18 – Short-Term Loans – Section 6.2-1818.3
7
Virginia Code Commission. Virginia Code 6.2-2216 – Authorized Fees and Charges
8
Virginia Code Commission. Virginia Code Chapter 18 – Short-Term Loans – Section 6.2-1818.2
9
Virginia Code Commission. Virginia Code Chapter 18 – Short-Term Loans – Section 6.2-1816
10
Virginia Code Commission. 10VAC5-200-80 – Short-Term Lending Pamphlet Text
11
Consumer Financial Protection Bureau. New Protections for Payday and Installment Loans Take Effect March 30
12
Virginia Code Commission. Virginia Code Chapter 18 – Short-Term Loans – Section 6.2-1816.1
13
Consumer Financial Protection Bureau. Can Taking Out a Payday Loan Help Rebuild My Credit or Improve My Credit Score?
14
Virginia State Corporation Commission. File a Financial Complaint
15
Virginia State Corporation Commission. Getting Help
16
Consumer Financial Protection Bureau. Consumer Complaint Database