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Bill

SB 456

Make various changes to the consumer installment loan law

136th Legislature (2025-2026) Introduced by George Lang

Creates a unified Ohio licensing regime for consumer installment loans (<=$5,000), standardizes terms, strengthens advertising disclosures, and enhances consumer protections.

Referred to committee
#commerce #consumerfinance #financialinstitutions
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Bill Summary · SB 456

Summary of SB 456 (Ohio, 136th General Assembly)

Purpose and intent

  • Referred to as a comprehensive update to Ohio’s consumer installment loan framework. The bill aims to create a unified licensing regime for consumer loans, replace existing sections within the Revised Code related to consumer installment lending, and introduce new standards, prohibitions, and oversight mechanisms enforced by the Division of Financial Institutions (DFI). It also establishes rules for advertising, recordkeeping, examinations, and enforcement, with an emphasis on consumer protection and consistent regulatory oversight.

Key provisions and changes

  • Licensing framework and scope

    • Repeals and replaces numerous current provisions governing consumer installment loans (e.g., sections 1321.02, 1321.62–1321.701, 1321.702/1321.703, etc.).
    • Creates a new consolidated structure for licensees under the Ohio Consumer Installment Loan Act (R.C. 1321.62 to 1321.703) and introduces a new section 1321.702 for bona fide error relief.
    • Requires licensees to obtain a license from the Division of Financial Institutions to operate consumer installment loans of $5,000 or less, and to comply with the Act’s limits on interest and charges.

  • Definitions and standardized terms

    • Expands and clarifies numerous definitions (e.g., actuarial method, advertisement, annual percentage rate, open-end vs. closed-end loans, consent, final entry, insurance-related terms, NMLSR, residential mortgage loan, etc.) to standardize how loans are marketed, disclosed, and serviced.
    • Introduces and codifies definitions for advertising practices, borrower records, and regulatory reporting.

  • Advertising and disclosures

    • Establishes strict advertising standards to prevent false, misleading, or deceptive practices.
    • Requires clear identification of the licensee and adherence to federal advertising standards (e.g., references to 12 CFR parts governing open- and closed-end loans).
    • Prohibits certain aggressive practices (time-limited offers without clear limitations, unqualified superlatives, “new”/“reduced” terms beyond 90 days, etc.).
    • Mandates comprehensive recordkeeping of all advertisements for two years.

  • Licensing process and oversight

    • Details application requirements, investigation fees, and annual license fees (including potential NMLSR-related fees).
    • Mandates background checks on control persons, including fingerprint-based or FBI-record checks, with costs borne by applicants.
    • Allows the Division to issue licenses, deny, suspend, or revoke licenses, and impose monetary fines (up to $25,000 per violation) for noncompliance.
    • Provides for cease-and-desist orders and civil penalties enforced in court.

  • Financial requirements for licensees

    • Requires licensees to maintain minimum net worth: at least $50,000.
    • Requires assets of at least $50,000 readily available for business use.
    • Sets ongoing recordkeeping and reporting obligations, with specific data elements to be maintained (loan-level and borrower-level data, payment histories, advertising records, and compliance-related documents).

  • Recordkeeping and examinations

    • Specifies extensive recordkeeping requirements, including:
    • Detailed loan information (principal, interest, fees, payment history, collateral status, etc.).
    • Advertisements and marketing materials.
    • Files for each borrower, including litigation and collection documents, repossessions, and insurance claims.
    • Separate, easily accessible electronic records with robust storage, indexing, and audit capabilities.
    • Examinations by the DFI occur at least every 24 months; the Division may require out-of-state examinations with prepayment of estimated costs.

  • Remote work locations for licensees

    • Allows employees to work from remote locations (not licensed places of business) under stringent conditions:
    • In-person customer interactions must occur only at licensed locations.
    • Strong data security and monitoring requirements, including secure networks.
    • Maintains records of remote locations and provides list to the regulator upon request.

  • Consumer protections and compliance

    • Prohibits certain abusive lending practices (e.g., tying loans to affiliates in ways that increase charges beyond what is permitted, double-dipping with multiple loans from related entities, etc.).
    • Requires clear notices for interest rate changes, including workout options and contact information.
    • Mandates transparent disclosures about maturity, terms, and the relationship to regulatory authority.
    • Establishes duties to prevent misrepresentations, blanks in loan documents, or pre-disbursement interest charges.

  • Enforcement and remedies

    • Provides authority for the Attorney General and county prosecutors to seek injunctions for violations.
    • Allows the Division to issue administrative penalties and pursue civil actions for unlicensed activity or noncompliance.
    • Directs fines to the Consumer Finance Fund.

Who is affected

  • Licensees and prospective licensees

    • Banks, credit unions, check-cashers, retailers, pawn brokers, premium finance companies, mortgage lenders, and other entities engaging in consumer installment lending under the proposed framework.
    • Entities currently operating under similar or related statutes must seek licensure, adjust practices, and maintain the specified reserves and recordkeeping.

  • Consumers/ Borrowers

    • Potential borrowers of $5,000 or less who use installment loan products will gain enhanced disclosures, clearer advertising, stronger protections against abusive terms, and enhanced access to complaint information and dispute resolution remedies.

  • Regulators and the Division of Financial Institutions

    • Receives expanded authority and detailed reporting requirements, including advanced data infrastructure, examinations, and coordination with federal multi-state licensing systems (NMLSR).

Procedural and timeline aspects

  • The bill specifies licensing to be valid through December 31 of the issue year, with provisions for license changes, name changes, and location updates to be processed without cost (in many cases).
  • It creates a staged transition from current sections to the new framework, consolidating and harmonizing the law, and directs harmonization of amendments to the composite text of Section 1321.02 to reflect changes from multiple prior assemblies.
  • The act includes a compliance grace for bona fide errors (1321.702) to encourage timely restitution and limit civil liability in certain error situations, subject to specific criteria and timely notification.

Notes
- The measure is introduced by Senator Lang with a co-sponsor and is in the introduction phase as of the current status. If enacted, it would significantly reshape Ohio’s consumer installment loan oversight, licensing, and consumer protection regime.

Compiled from official sources — confirm details with the bill’s official record.

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