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payday loans51 and a 36% yearly interest rate cap on auto-title loans.52 These caps appear to have shut down the making of both new payday and new auto-title loans in this state. The amended auto-title statute does permit lenders to pass along their actual costs for perfecting a security interest in the title to bor- rowers and recognizes that this fee may cause the true annualized cost for an auto-title loan to exceed 36%.53 However, the only actual cost that appears to have been contemplated when this legislation was passed was the fee lenders must pay to the state Division of Motor Vehi- cles to perfect their security interest.54 This fee is excludable from the nance charge de- nition under TILA (with proper disclosure) because it is paid to a public ofcial for per- fecting a security interest.55 New Hampshire’s auto-title law is thus properly understood as imposing a 36% APR cap. The Scorecard has changed New Hampshire’s grades in the pay- day and auto-title loan categories from Fs to Ps.

In addition, New Hampshire appears to be moving toward a 36% APR cap for loans of $10,000 or less. The APR would be computed using the TILA denition of nance charge; however, it would exclude one application fee per borrower per year and one participation or

51 52 53 54 N.H. Rev. Stat. Ann. § 399-A:13(XX). N.H. Rev. Stat. Ann. § 399-A:14(VI). N.H. Rev. Stat. Ann. § 399-A:14(VI). According to an attorney familiar with passage of the bill amending the auto title statute, the only discussion of any actual costs to be passed through to borrowers was the $25 fee lenders must pay to the Division of Motor Vehicles (DMV) to perfect their security interest in a vehicle. E-mail from Attorney Sarah Mattson, New Hampshire Legal Assistance, Auto Title follow-up (Apr. 8, 2010, 10:56 a.m. EDT) (on le with NCLC).

55

12 C.F.R. § 226.4(e)(1).

NATIONAL CONSUMER LAW CENTER

membership fee per borrower from the nance charge, leaving some room for the TILA APR to exceed 36%. As of April 15, 2010, this bill, S.B. 193, had passed the House and gone to the Senate. If this bill passes and becomes law, New Hampshire will have gone from having no rate caps on any of the four products in the Scorecard to having some limit on all of them in the span of roughly two years, a signicant accomplishment.

Ohio: This state enacted a 28% annual interest rate cap for payday loans, effective September 1, 2008. This was a signicant change, as Ohio had previously permitted payday loans up to 391% APR. However, many payday lenders have stayed in business through a loophole: using licenses issued under the state’s small loan and mortgage loan acts. The fees permitted by these laws, which were intended to be applied to longer term installment loans and mortgage loans, result in triple digit APRs when used for two-week payday loans.56 Measures are being taken to address this problem, including efforts by the Ohio Department of Commerce to revoke several lenders’ licenses57 and proposed legislation that aims to close this loophole.58 Because it has a

56 David Rothstein, Policy Matters Ohio, New Law, Same Old Loans: Payday Lenders Sidestep Ohio Law 2 (Sept. 2009), available at http://www.policymat- tersohio.org/pdf/NewLawSameOldLoans2009.pdf (explaining that the APR for a two week payday loan of $100 is 423% when the small loan act is used and 680% when the mortgage loan act is used).

57 Sheryl Harris, Ohio Department of Commerce Takes Steps to Revoke Payday Lenders’ Licenses, Plain Dealer (Feb. 2, 2010), available at http://www.cleveland .com/consumeraffairs/index.ssf/2010/02/ohio_ department_of_commerce_ta.html.

58 Thomas Suddes, A Bipartisan Stall Thwarts Ohioans’ Will on Lending Rate, Plain Dealer (Mar. 21, 2010), available at http://www.cleveland.com/opinion/

Updated Small Dollar Loan Products 5 11

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