<¶>This appeal concerns the continued viability of payday lending in Ohio and raises questions regarding how payday loans fit within Ohio’s current statutory lending framework.
<¶> Ohio Legislative Service Commission, Payday Lending in Ohio, Members Only Brief, Vol. 130, Issue 1 () (“Payday Lending ”). The borrower generally writes the lender a check for the full loan amount plus all applicable fees and interest, postdated to the borrower’s next payday, or authorizes the lender to electronically debit that amount from the borrower’s bank account on the borrower’s next payday. Id.; In re Meadows, 396 B.R. 485, 498 (BAP 6th Cir.2008), fn. 8 (Gregg, J., concurring), quoting Easha Anand, Payday Lenders Back Measures to Unwind State Restrictions, Wall Street Journal (), A6.
Payday loans are generally brief, unsecured, short-identity funds, commonly motorcycle title loans in New Mexico repayable into borrower’s second pay day
<¶>To be sure, payday lending is controversial. Proponents argue that payday loans are necessary and less costly than other available alternatives for low-income individuals to cover unexpected expenses. Opponents argue that the high costs of payday loans, combined with their short terms, trap borrowers in a cycle of debt, with borrowers often resorting to additional loans to pay off prior loans. Id. at 1–2.
<¶>R.C. Chapter 1321 governs all manner of loans in Ohio; it includes the Small Loan Act, R.C. to , the Ohio Mortgage Loan Act (“MLA”), R.C. to , and the Short–Term Lender Act (“STLA”), R.C. to . We are concerned here primarily with the MLA and the STLA. In this appeal, we first consider whether the plain language of the MLA, and particularly the definition of “interest-bearing loan” in R.C. (F), precludes the issuance of single-installment loans. Next, we consider whether the more recently enacted STLA prohibits registered lenders under the MLA from making payday-style loans even if the plain language of the MLA otherwise authorizes those loans.
<¶>For the reasons we detail below, based on the unambiguous language of R.C. (F) and (A), the longstanding practice of the Ohio Department of Commerce, Division of Financial Institutions, to allow single-installment loans under the MLA, and the absence of any language in the STLA that limits the authority of MLA lenders, we hold that an “interest-bearing loan” under the MLA may require repayment in a single installment and that neither the MLA nor the STLA prohibits registered MLA lenders from making single-installment, interest-bearing loans.
<¶>The MLA was originally enacted in 1965 and, at that time, applied only to lenders who took second mortgages as security for loans. Am.Sub.H.B. No. 403, 131 Ohio Laws, Part I, 439, and Part II, 1804. Now, however, the MLA extends far beyond its initial reach. A registered MLA lender may now make “unsecured loans, loans secured by a mortgage on a borrower’s real estate which is a first lien or other than a first lien on the real estate, loans secured by other than real estate, and loans secured by any combination of mortgages and security interests, on terms and conditions provided by [the MLA].” R.C. (C). With the exception of those entities exempted by R.C. (D), a lender that wants to make loans under the MLA must register with the Ohio Department of Commerce, Division of Financial Institutions. R.C. (A)(1).
<¶>MLA loans may be either interest-bearing or precomputed. R.C. (A). An “interest-bearing loan” is a loan “in which the debt is expressed as the principal amount and interest is computed, charged, and collected on unpaid principal balances outstanding from time to time.” R.C. (F). Pursuant to R.C. (C)(1)(a), interest on an interest-bearing loan is to be computed on the unpaid principal outstanding from time to time, for the time outstanding. A “precomputed loan” is “a loan in which the debt is a sum comprising the principal amount and the amount of interest computed in advance on the assumption that all scheduled payments will be made when due.” R.C. (G). Pursuant to R.C. (D)(1), a precomputed loan must be repayable in monthly installments, but there is no equivalent, express requirement for interest-bearing loans.