Chapter 1301:8-2 Small Loan Act

1301:8-2-01 Definitions.

(A) "Current assets," as used in section 1321.05 of the Revised Code, means cash on hand and in depository institutions, readily marketable securities, accounts receivable less allowances for uncollectible accounts, and real estate less liens and depreciation. "Current assets" shall not include office premises, leasehold improvements, office furniture, fixtures, equipment or intangible assets.

(B) "Direct mail," as used in this chapter, means a loan arranged via an application through the United States postal mail or internet and the loan proceeds delivered through the United States postal mail or electronic transmission to the benefit of a borrower. A loan is not made by "direct mail" if it is facilitated by face to face, personal contact in this state between the lender, lender's employee or agent, or lender's attorney and the borrower or borrower's agent. For purposes of this rule, a bona fide third party title agency, notary, insured depository, or attorney which is suggested as part of a list of three or more recommended but not required closing providers, shall not be considered an agent of the lender. Nothing in this rule shall prohibit a licensee from creating a list of disapproved vendors, nor shall persons selected by the borrower only to witness his or her signature in compliance with a list be considered an agent of the lender.

(C) "Condition of the loan," as used in this chapter, means that approval or denial of a borrower's loan is based on the borrower's acceptance of other transactions made in conjunction with the loan. This interpretation shall not restrict the rights of small loan licensees under division (F) of section 1321.13 of the Revised Code.

(D) "Affiliation" or "affiliated with" as used in sections 1321.01 to 1321.19 of the Revised Code and this chapter shall mean directly or indirectly through one or more intermediaries controlled by or under common control with another person or enterprise. "Control" shall mean the authority to direct or cause the direction of the management and policies through ownership, by contract, or otherwise.

(E) "Final entry on a loan," as used in this chapter, means, as to that lender, the latter of the date the loan is:

(1) Paid in full,

(2) Deemed uncollectible,

(3) Assigned to another registrant or exempt entity and all records are transferred to the new lender, or

(4) Discharged or otherwise settled by an order terminating litigation governing the loan transaction.

Replaces: 1301:8-2-03

Effective: 07/01/2008
R.C. 119.032 review dates: 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.01 to 1321.21
Prior Effective Dates: 2-1-1986

1301:8-2-03 Current assets. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-04 Recordkeeping requirements.

(A) All small loan records required to be maintained by this rule shall be kept current and shall be available at all times during normal business hours for review by the division of financial institutions. Records shall be legible and maintained in a type size that is clearly readable without magnification, and in conformity with any specific typeface or font size that may be required by state or federal law. Except where otherwise provided by federal or state law, records shall be maintained in English. When records are allowed to be in a language other than English, the small loan licensee, at its expense, shall be responsible for providing the division with a full and accurate translation. For purposes of recordkeeping, "current" means within thirty business days from the date of the occurrence of the event required to be recorded. Each Pursuant to section 1321.09 of the Revised Code, each small loan licensee shall maintain the following paper records for all loans made pursuant to sections 1321.01 to 1321.19 of the Revised Code for at least a period of two years after making the final entry on any loan at either the licensed office or any other location approved in writing in advance by the superintendent of financial institutions.

(1) A ledger record shall be kept for each outstanding loan paid in full within the last two years upon which a chronological entry of all credits, debits, payments and charges received, assessed or disbursed in connection with the loan shall be recorded in an identifiable manner, in order to show the actual date of receipt, assessment or disbursement and the balance due on the account after each entry.

(2) A loan statement kept in chronological order shall be maintained in one file for at least two years after making the final entry for each loan made by the licensee. The loan statement shall disclose the following information if applicable:

(a) Account number;

(b) Principal borrower's name and residence address;

(c) Date of loan;

(d) Date finance charges begin to accrue;

(e) Contractual rate of loan interest;

(f) Federal annual percentage rate;

(g) Loan origination charge;

(h) Original principal amount;

(i) Scheduled or precomputed interest;

(j) Total of payments;

(k) Type of security;

(l) Terms of repayment;

(m) Names of all comakers, guarantors, or other obligors;

(n) Types and amount of credit-related insurance;

(o) Unit default charge;

(p) Credit bureau fee;

(q) Where and to whom hypothecated;

(r) An indication as to whether or not the loan is a "refinancing," as that term is defined in division (A)(11) of section 1321.01 of the Revised Code.

(3) All loan agreements, notes, disclosure forms, closing statements, security agreements and other documents signed by the obligors and taken in connection with loans made, shall be identified by the loan number and maintained in a separate file for each borrower.

(4) An alphabetical index of all borrowers, comakers, guarantors, and other obligors identified by account number shall be maintained with respect to all persons obligated for interest in excess of the current usury rate.

(5) A record of all loans in litigation shall be maintained in a litigation record. The litigation record shall be maintained for at least two years after the final entry has been made on the loan, be kept current, and include the following information:

(a) Loan number and name of principal borrower;

(b) Date litigation proceedings were initiated, the date and amount of the judgment and the judgment rate of interest;

(c) All original litigation records and documents, including pleadings, court orders, judgments, and documentation of all court costs paid by the borrower to or through the licensee, or copies thereof shall be maintained in the file of original papers; and

(d) In cases of garnishment or attachment, all notices served on employers or copies thereof and the amounts collected shall be maintained in the file of original loan papers.

(6) A record of all loans in repossession shall be maintained in a repossession record. The repossession record shall be maintained for at least two years after the final entry has been made on the loan, be kept current, and include the following information:

(a) Loan number and name of principal borrower;

(b) Type of security attached, replevined, repossessed, or surrendered;

(c) Date of repossession, date of sale of the security, the gross amount received from the sale of the security, expenses deducted from the sale of the security and the amount of money applied to the outstanding loan balance;

(d) All original repossession legal documents and other records, including bills for all expenses or copies thereof shall be maintained in the file of original loan papers; and

(e) In instances where the security is offered for private sale, there must be in the borrower's file not less than three bona fide written bids or appraisals in order to establish that the terms of sale were fair to the borrower. Where the security is offered for private or public sale, the sale must be consummated in compliance with the provisions of sections 1309.610 , 1309.611 , 1309.615 , 1309.617 , and 1309.624 of the Revised Code.

(7) A credit life claim record shall be maintained for all loans upon which a credit life claim has been paid by the insurer. The credit life claims record shall be maintained for at least two years after the final entry has been made on the loan, be kept current, and include the following information:

(a) Loan number and name of principal borrower;

(b) Date of death and a certified copy of the death certificate or a copy thereof;

(c) Name and address of second beneficiary, if any; and

(d) Copies of all checks received or paid pertaining to a credit life claim.

(8) Histories of nonpublished indices used to establish interest rates for variable rate loans shall be maintained for two years from date of usage, and shall be available for review by the division of financial institutions.

(9) A log for business conducted with brokers that is maintained in chronological order and contains the following information:

(a) Amounts of fees paid to brokers;

(b) Names and addresses of brokers; and

(c) Dates of transactions with brokers.

(B) Due bills, receipts, invoices or other evidence shall be maintained in the file of original loan papers for any amount in excess of twenty dollars paid by the borrower to or through the small loan licensee for any dishonored check, negotiable order of withdrawal, share draft or any other negotiable instrument.

(C) A small loan licensee may, for any business purpose, retain a document, paper, or other instrument or record by use of a process to record, copy, photograph, or store a representation of the original document, paper, or other instrument or record, if all of the following apply:

(1) The process correctly and accurately copies or reproduces, or provides a means for correctly and accurately copying or reproducing, the original document, paper, or other instrument or record with regard to both its substance and appearance, except the copy or reproduction need not reflect the original paper or other medium, size, or color unless the medium, size or color is necessary to establish the authenticity of the original.

(2) The process does not permit the recording, copy, photographic image, or stored representation of the original document, paper, or other instrument or record to be altered or manipulated.

(3) Any medium the process uses to record, copy, photograph, or store a representation of the original document, paper, or other instrument or record is a durable medium for retaining and reproducing records.

(4) The process is used in the small loan licensee's regular course of business.

(5) Written printouts or hard copies of the required data are readily available.

(6) The superintendent has given written authorization in advance to the small loan licensee to use the process.

(D) In order to reduce the risk of consumer fraud and related harms, including identity theft, small loan licensees shall be required to comply with the provisions of the "Fair and Accurate Credit Transactions Act of 2003," 117 Stat. 1952, 15 U.S.C. 1681w as in effect on January 1, 2008, the "Gramm Leach Bliley Act," 113 Stat. 1338 (1999), 15 U.S.C. 6801 as in effect on January 1, 2008, and the rules promulgated pursuant to those federal acts, including 16 C.F.R. 682, as in effect January 1, 2008, pertaining to the maintenance, security, and disposal of consumer information and records.

(E) Before ceasing to conduct or discontinuing business as a small loan licensee, the small loan licensee shall arrange for and be responsible for the preservation of the books and records required to be maintained and preserved under this rule for the remainder of the period specified in this rule, and shall notify the division in writing of the exact address where the books and records will be maintained during the required period.

(F) The division of financial institutions may suspend or revoke any small loan license issued by the division or bring any other authorized administrative enforcement action against any person for failure to maintain records in accordance with section 1321.09 of the Revised Code or this rule.

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.09
Prior Effective Dates: 2/1/86, 5/1/95, 11/13/97

1301:8-2-05 Advertising.

(A) The following advertising requirements shall be observed by all small loan licensees:

(1) The words "advertisement" and "advertising," as used in sections 1321.01 to 1321.19 of the Revised Code and this chapter, shall include all material printed, published, displayed, distributed or broadcast for the purpose of obtaining applications for loans. Materials displayed or distributed over the internet, telephone, facsimile, or other electronic transmission for the purposes of obtaining applications for loans are considered advertising for purposes of this rule.

(2) A small loan licensee shall not advertise that loans will be made at any place other than that named in the small loan license. Every advertisement shall state and clearly indicate the identity of the small loan licensee and shall do so in a manner that prevents confusion with the name of any other unrelated small loan licensee.

(3) A small loan licensee shall not use loan advertisements, such as providing only telephone or facsimile number or newspaper box address, that do not clearly indicate the identity of the small loan licensee.

(4) A small loan licensee shall not advertise that loans shall be made within a specified time after the loan application is received, unless it is the general practice of the small loan licensee to make such loans within the specified time.

(5) A small loan licensee shall not advertise special terms, reduced rates, reduced payments, or any other special feature of a loan within a specified limited time, unless the advertisement clearly states any limitations that apply to the offer.

(6) A small loan licensee shall not advertise by the use of unqualified superlatives, including but not limited to "lowest rates," "lowest costs," "lowest payment plan," or "cheapest loans," or by making offers which cannot be reasonably fulfilled.

(7) A small loan licensee shall not advertise the words "new" or "reduced," or words of similar import, in connection with rates, costs, payments or plans, for more than ninety days after the rates, costs, payments or plans shall have become effective.

(8) Any small loan licensee specifying in any advertisement charges on loans in dollars shall also state the length of time required to repay the loans as well as the method of repayment, and shall, when the rate of interest is stated, do so in a manner to prevent misunderstanding.

(9) Any small loan licensee advertising flat or average payments on loans which include principal and interest shall specify the number and frequency of payments required to repay the loans. Whenever the amounts of periodic payments are advertised, the amounts must include all interest to the borrower, as well as principal. However, the principal payments alone may be shown separately, provided the interest charges are also clearly stated with equal prominence.

(10) A small loan licensee shall not advertise rebates, rates, or charges below the maximum lawful rate of interest which are conditioned upon prompt payment unless the condition is clearly indicated.

(11) A small loan licensee shall not advertise:

(a) Waiver of payments in the event of sickness or disability or other contingency, without advertising that the interest and other charges, if assessed, continue during the waiver period.

(b) That the first payment on any loan may be made more than thirty days after the date of loan closing, without advertising that the interest and other charges, if assessed, will accrue from the date of disbursement of the loan funds until the first payment is due.

(12) A small loan licensee shall not advertise loans for illegal purposes.

(13) A small loan licensee shall not advertise specific amounts of loans to be made on designated makes and models of automobiles unless it is also stated that the amounts so specified are only the average loan values and are subject to the actual condition of the automobiles.

(14) A small loan licensee shall not give, or advertise an offer to give, any article or merchandise or anything of value, other than a reduction in interest, as an inducement to a borrower to make a loan.

(15) A small loan licensee shall not advertise the availability of credit-related insurance without disclosing the charge, if any, for the insurance.

(B) Every small loan licensee shall maintain in each licensed office or in a central location, approved by the superintendent of financial institutions a record or file of all advertising, including newspaper, magazine, direct mailing, facsimile advertising and solicitations, roadside advertising, internet and scripts of radio and television commercials, for a period of two years from the date disseminated. A record or other file shall be readily available for inspection by the division of financial institutions at all times. Every small loan licensee shall notify the division of financial institutions in writing of the location of the record or file. Upon request of the superintendent, all small loan licensees shall provide the division with copies of any printed or electronic advertising used regarding any business conducted under sections 1321.01 to 1321.19 of the Revised Code. Text of advertising shall be maintained by the small loan licensee for two years from the date of usage.

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.07 , 1321.11
Prior Effective Dates: 2/1/86, 11/13/97

1301:8-2-06 Location of a licensee's records out-of-state; out-of-state examination.

In the event books, records, data and documents of a small loan licensee are located outside Ohio the small loan licensee shall be required, upon the request of the superintendent, to pay in advance the estimated costs of the examination of the small loan licensee outside the state of Ohio, including the proportionate cost of the salaries of division of financial institutions employees who conduct the examination. The estimated costs of an out-of-state examination, as determined by the superintendent, shall be deposited with the division upon demand. After the actual costs of the out-of-state examination have been determined, any funds in the deposit account in excess of costs as itemized by the division shall be returned to the small loan licensee.

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.07 , 1321.09 , 1321.04
Prior Effective Dates: 2/1/86, 11-13-1997

1301:8-2-07 General provisions for small loan licensees.

(A) Except in the cases of loans made by direct mail, loans where the additional signature of a spouse, co-signor or guarantor is necessary or loans where one or more of the obligors is ill or disabled, no loan agreements, security agreements or other documents or papers involved with the making or renewing of a loan shall be signed by any obligor anywhere other than the licensed premises. In the instances when the additional signature of a spouse, co-signor or guarantor is necessary or when one or more of the obligors is ill or disabled, the signature may be obtained at an address other than that licensed, but in no case may the signature be obtained by any person other than an obligor or an employee of the licensee.

(B) For purposes of sections 1321.01 to 1321.19 of the Revised Code, a loan is considered closed upon the signature of the obligor or obligors unless the loan contract is not executed by signature, in which case the loan is considered closed upon disbursement of loan funds.

(C) All loans made pursuant to sections 1321.01 to 1321.19 of the Revised Code, if made by direct mail as defined in this chapter, shall be made from a duly licensed location.

(D) Small loan licensees have an ongoing duty to notify the division of financial institutions of material changes in the information contained in the application and exhibits, schedules and other documentation submitted in conjunction with the application, and to report all changes or additions to information in the application within thirty days of the change. Material changes in the information include changes in affiliations, controlling interest, officers, directors, criminal record, and net worth.

(E) The small loan licensee shall notify the borrower:

(1) In writing of any interest rate change at least thirty but not more than one hundred twenty days prior to the effective date of the changes, provided that if the interest rate is tied to a published and verifiable index and the contractual rate of interest is adjusted within forty five days of change in the published index rate, the small loan licensee shall notify the borrower in writing of any interest rate change at least thirty days prior to the effective date of the change.

(2) In the instance of a non-amortized or partially amortized interest-bearing loan, of maturity at least ninety but not more than one hundred twenty days prior to the expected maturity date.

(F) The small loan licensee shall obtain written consent of the borrower for any purchase of insurance on property other than that which is used as security for the loan.

(G) Small loan licensees shall clearly indicate by prominently disclosing on, or in, the loan documents, the federal or state statutory authority pursuant to which a loan is made. For purposes of this chapter, small loan licensees shall be required to provide this prominent disclosure on loans made:

(1) Solely in reliance on the provisions of sections 1321.01 to 1321.19 of the Revised Code;

(2) Partially in reliance on the provisions of sections 1321.01 to 1321.19 of the Revised Code; or

(3) In reliance on any combination of federal or state provisions that do not include sections 1321.01 to 1321.19 of the Revised Code.

(H) A small loan licensee is not prohibited from holding other licenses or registrations issued by the division of financial institutions as long as the small loan licensee is in compliance with sections 1321.12 and 1321.59 of the Revised Code and other applicable provisions of state and federal law.

Replaces: 1301:8-2-07, 1301:8-2-08, 1301:8-2-09, 1301:8-2-13, 1301:8-2-15, 1301:8-2-17, 1301:8-2-18

Effective: 07/01/2008
R.C. 119.032 review dates: 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.01 to 1321.19
Prior Effective Dates: 2-1-1986

1301:8-2-08 Loan closing. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-09 Loans made by direct mail. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-10 No personal, face-to-face contact if reciprocity claimed. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-11 Sale, assignment or collection of loans by licensee; payment of annual assessment. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-12 Prohibitions.

(A) No small loan licensee shall take any note or other promise to pay that does not set forth the entire agreement made with the borrower.

(B) No small loan licensee shall charge or collect interest prior to the date of disbursement of the loan funds to the borrower.

(C) A new loan shall not be made for the purpose of paying any part of the interest or principal due on an existing loan with the same small loan licensee unless the interest and principal balance of the existing loan is paid in full from the proceeds of the new loan.

(D) A small loan licensee shall not collect more than one default charge per unpaid installment regardless of the number of months the installment remains fully unpaid.

(E) No lender regulated or licensed in another state under a loan law similar in principle to sections 1321.01 to 1321.19 of the Revised Code operating under the provision of section 1321.17 of the Revised Code shall close loans in Ohio, by face-to-face, personal contact in this state between the lender, employee, agent or attorney of the lender and the borrower or borrower's agent without first obtaining a license to conduct business under sections 1321.01 to 1321.19 of the Revised Code. For purposes of this rule, a bona fide third party title agency, notary, insured depository, or attorney which is suggested as part of a list of three or more recommended but not required closing providers, shall not be considered an agent of the lender. Nothing in this rule shall prohibit a qualified out of state lender from creating a list of disapproved vendors, nor shall persons selected by the borrower only to witness the borrower's signature in compliance with a list be considered an agent of the lender.

(F) Loans made pursuant to sections 1321.01 to 1321.19 of the Revised Code shall not be sold, transferred or assigned to or collected by persons other than a small loan licensee pursuant to sections 1321.01 to 1321.19 of the Revised Code or an exempt entity described in section 1321.02 of the Revised Code that is properly conducting business under and as permitted by any law or authority referred to in that section. The small loan licensee is liable for payment of the annual assessment described in section 1321.20 of the Revised Code on any loan made by the small loan licensee which has been sold, transferred, or assigned to another person if servicing rights have been retained by the small loan licensee.

Replaces: 1301:8-2-10, 1301:8-2-11

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.01 to 1321.19
Prior Effective Dates: 2/1/1986, 5/1/1995

1301:8-2-13 Notice of interest rate adjustment or maturity. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-14 Receipts for dishonored check charges. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-15 Written consent to insurance on non-security. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-16 Policy or certificate of insurance; disclosure of credit life and credit accident and health insurance cancellation rights; Ohio insurance law.

(A) When, in connection with a loan, a small loan licensee furnishes or places insurance written on behalf of the borrower at the borrower's expense, a policy or certificate of insurance properly executed shall be furnished to the borrower within thirty days of the closing date of the loan. The policy or certificate shall state the name of the insurance company, the nature of the insurance, the extent of the coverage, the amount of the premium, and the effective and expiration dates of the policy.

(B) If a small loan licensee furnishes or places credit life insurance, or credit accident and health insurance, or unemployment insurance on behalf of the borrower at the borrower's expense, the small loan licensee shall give written notice to the borrower at the time the loan is made. The notice shall disclose the borrower's right to cancel the insurance within twenty-five days of the purchase of insurance with a full refund of the premium or identifiable charge for the insurance. The notice shall further disclose that the cancellation may be effected upon the written request of the borrower together with the return of the policy or certificate of insurance to the small loan licensee.

(C) All insurance sold or obtained in connection with the making of a loan shall be governed by Title 39 of the Revised Code.

(D) In any transaction in which the small loan licensee furnishes or places insurance on behalf of the borrower at the borrower's expense, the small loan licensee shall, prior to furnishing or placing insurance, provide written disclosure to the borrower of the business relationship, beneficial ownership or affiliation, whether direct or indirect, between the small loan licensee and the insurer.

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.13
Prior Effective Dates: 2/1/1986, 5/1/95

1301:8-2-17 Other loans. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-18 Affiliation of licensee. [Rescinded].

Rescinded eff 7-01-08

1301:8-2-20 Interpretation.

(A) The language contained in division (G) of section 1321.13 of the Revised Code does not limit the rights of small loan licensees to engage in other transactions with borrowers, provided the transactions are not a condition of the loan.

(B) The division of financial institutions will not interpret or construe any act or omission of a small loan licensee to be in violation of sections 1321.01 to 1321.19 of the Revised Code if the act was taken or omission was made in reliance on a written notice or examination report from the division.

(C) The language contained in division (G) of section 1321.13 of the Revised Code permits small loan licensees to use funds received from borrowers in amounts authorized by law to record, file or release security interest on a loan for purposes either of purchasing insurance to insure the small loan licensee against losses for failure to record or file or creating a self-insurance fund to reimburse the small loan licensee against losses for failure to record or file.

Effective: 07/01/2008
R.C. 119.032 review dates: 02/11/2008 and 11/15/2012
Promulgated Under: 119.03
Statutory Authority: 1321.10(A)
Rule Amplifies: 1321.13
Prior Effective Dates: 5/1/1995, 11/13/1997