Ohio's legislative session eases some worries for banks.

Community bankers in Ohio this fall will enjoy the fruits of their legislative labors: environmental liability protections for secured lenders and a permanent 25% interest rate ceiling.

Both gains were amendments to bills passed and signed during the spring legislative session and become effective in September.

The environmental liability protections were part of broader environmental reform legislation.

Bankers' relief comes from amendments that protect lenders from the potentially hefty costs of remedying or investigating a release of hazardous substances. This assumes that after taking the property's title, the secured lender complies with other state environmental laws.

About 1,400 sites were under the jurisdiction of Ohio's environmental agency in 1993, said Jeffrey D. Quayle, vice president and general counsel for the Ohio Bankers Association.

The bill allows banks to make loans -- such as to dry cleaners -- that they might have shunned because of liability concerns, said Stephen Wilson, president and chief executive of $300 million-asset Lebanon Citizens National Bank.

Before, "we could make a $10,000 loan and have a $1 million liability for cleanup," Mr. Wilson said.

With stakes like that, the new lender protection especially helps smaller institutions, Mr. Quayle said.

"Nobody would like to get whacked with a $1 million cleanup bill," he said. But while a regional could likely charge it off and move on, "a $1 million hit to a community bank could kill them," he said.

Rate Cap Becomes Permanent

In the usury bill, legislators made permanent a 25% interest rate ceiling that had been temporary since it was raised from 18% in 1981. Legislators previously had to seek extensions on the rate at frequent intervals.

"That is something we as bankers had to go to Columbus and battle every three years," Mr. Wilson said.

The statute also gives banks flexibility in setting interest rates on riskier-than-usual loans, Mr. Quayle said.

The ceiling also bolsters Ohio's economy, Mr. Wilson said. "It makes our state continue to be favorable for jobs that relate to the credit card industry."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER