Ohio Gov. John Kasich has signed a bill that will place new restrictions on high-cost consumer loans in the Buckeye State.

The law, which was opposed by the short-term lending industry, closes a decade-old legal loophole that enabled lenders to charge annual percentage rates in excess of 500%.

Kasich, a Republican whose second term as governor ends in January, signed the legislation Monday after it passed the state legislature with bipartisan support.

For loans of less than 90 days, the law caps monthly payments at 6% of the borrower’s gross income or 7% of net income.

Payday advance storefront
Payday advance storefront Bloomberg News

The measure also caps the cost of small-dollar loans, including both fees and interest, at 60% of the original principal.

So borrowers could pay up to $360 in interest and fees on a $600 loan with a 10-month term. Previously under Ohio law, a similar loan could have cost more than twice as much, according to the Pew Charitable Trusts, which backed the legislation.

Ohio follows Colorado in adopting a regulatory framework pushed by Pew, a nonprofit organization that operates in 46 states. The group is advocating for a middle course between the strict usury caps favored by some consumer advocacy organizations and the far less restrictive approach favored by payday lenders.

Nick Bourke, director of consumer finance at Pew, testified in July that the Ohio measure is somewhat more generous to lenders than Colorado’s law. But he called the bill a fair compromise.

“It will achieve lower prices, affordable payments, and reasonable time to repay,” Bourke said in testimony to a state Senate committee.

In 2008, Ohio passed a law that capped APRs at 28%, but lenders got around those rules by registering as credit service organizations, which allowed them to charge expensive broker fees.

Earlier this year, news emerged that a former Ohio House speaker was under investigation by the FBI after taking a foreign trip with payday lending lobbyists. Those revelations were credited with spurring the state legislature to pass the bill that was signed into law on Monday.

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