Ohio Department of Commerce
Division of Financial Institutions Governor
77 South High Street - 21 St Floor
Columbus, OH 43266-0121
(614)728-8400 FAX (614)644-1631
November 14, 1997
Dear Small Loan Act Licensee:
Enclosed are six Ohio Administrative Code ("OAC") rules which amplify the Ohio Small Loan Act that have been amended, effective November 13, 1997, and are briefly summarized below:
1. Amend OAC 1301:8-2-04, OAC 1301:8-2-05, OAC 1301:8-2-11, OAC 1301:8-2-17, and OAC 1301:8-2-20. The amendments change every reference to the former Division or Superintendent of Consumer Finance to the current Division or Superintendent of Financial Institutions.
2. Amend OAC 1301:8-2-06. The amendment eliminates redundant language currently found in OAC 1301:8-2-04(A) regarding recordkeeping for all small loan licensees.
The following rules have been rescinded, effective November 13, 1997. A rescission has the effect of completely removing a rule from the law. Please make note of the rescissions briefly summarized below:
1 . Rescind OAC rule 1301:8-2-02. The rule restated language found in Ohio Revised Code ("OAC") 1321-05 and 1321.06 regarding small loan licenses.
2. Rescind OAC 1301:8-2-19. The rule stated all information regarding small loan licensees obtained by the Division was confidential absent statutory authority permitting these records to be non-public.
If you have any questions regarding this administrative rulemaking action, do not hesitate to call me at (614) 644-7489.
Sincerely,
Chrisanthy J. Loizos
Legal Counsel
Enclosures
(A) Each licensee shall maintain the following records for all loans made pursuant to sections 1321.01 to 1321.19 of tile Revised Code at either the licensed office or any other location approved in advance by the superintendent of financial institutions.
(B) The following required records shall be kept up-to-date and shall be available at all times for review by the division 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 tile 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;
(1) 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 I1321.01 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) A transaction journal, which shall indicate the account number and name of principal borrowers, shall be maintained on a daily basis and shall document all transactions involving either the receipt or disbursement of money on the account of borrowers, and the actual date of any such transaction, shall be made available to the division of financial institutions upon the request of the superintendent.
(5) 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.
(6) 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 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,
(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.
(7) 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 tile 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;
(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 section 1309.47 of the Revised Code.
(8) 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;
(d) Copies of all checks received or paid pertaining to a credit life claim.
(9) Histories of the indexes 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 examiners of the division of financial institutions.
(10) Other methods of recording data, keeping records and keeping books, such as electronic or computerized methods, may be used in lieu of the methods described in this rule, provided written printouts or hard copies of the required data are readily available in a form approved, in advance, by the superintendent.
(11) Each licensee conducting business as a lender shall maintain a log for business conducted with brokers. This log shall be kept in chronological order and shall contain the following information:
(a) Amounts of fees paid to brokers,
(b) Names and addresses of brokers;
(c) Dates of transactions with brokers.
Effective: November 13, 1997
(A) The following advertising requirements shall be observed by all licensees
(1) The words "advertisement" and "advertising," as used in sections 1321.01 to l321.19 of the Revised Code and these rules, shall include all material printed, published, displayed, distributed or broadcast for the purpose of obtaining applications for loans.
(2) Licensee shall not advertise that loans will be made at any place other than that named in his license. Every advertisement shall state and clearly indicate the identity of the licensee and shall do so in such a manner that prevents confusion with the name of any other unrelated licensee.
(3) A licensee shall not use loan advertisements, such as providing only telephone or newspaper box address, that do not clearly indicate the identity of the licensee.
(4) A 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 licensee to make such loans within the specified time.
(5) A 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 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 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 licensee specifying in any advertisement charges on loans in dollars shall also state the length of time required to pay such 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 licensee advertising flat or average payments on loans which include principal and interest shall specify the number and frequency of payments required to pay such loans. Whenever the amounts of periodic payments are advertised, said 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 licensee shall not advertise rebates, rates or charges below the maximum lawful rate of interest which are conditioned upon prompt payment unless such condition is clearly indicated.
11) A licensee shall neither advertise waiver of payments in the event of sickness or disability or other contingency, without advertising that the interest and other charges continue during the waiver period, if such is the fact, nor advertise that the first payment on any loan may be made more than thirty days after the date of loan closing, without also advertising that the interest and other charges will accrue from the date of disbursement of the loan funds until the first payment is due, if such is the fact.
(12) A licensee shall not advertise for loans for illegal purposes.
(13) A 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 such automobiles.
(14) A 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 licensee shall not advertise the availability of credit-related insurance without disclosing the charge, if any, for such insurance.
(B) Every licensee shall maintain in each licensed office or in a central location, approved by the superintendent of financial institutions a scrapbook or file of all newspaper, magazine, direct mailing, and roadside advertising, and scripts of radio and television commercials, for a period of one year from the date disseminated. Such scrapbook or other file shall be readily available for inspection by the division of financial institutions at all times. Every licensee shall notify the division in writing of the location of the scrapbook or file.
Effective: November 13, 1997
In the event books, records, data and documents of a licensee are located outside Ohio the licensee shall be required upon the request of the superintendent, to pay in advance the estimated costs of the examination of the licensee outside the state of Ohio, including the proportionate cost of the salaries of division of consumer finance employees who conduct the examination. The estimated costs of such 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 licensee.
(A) Loans made pursuant to sections 1321.01 to 1321.19 of the Revised Code cannot be sold, transferred or assigned without written notice to the superintendent of financial institutions and in no case shall such loans be sold, transferred or assigned to or collected by persons other than a licensee pursuant to sections 1321.01 to 1321.19 of tile Revised Code or an exempt entity described in section l321.02 of the Revised Code that is properly conducting business under and as permitted by any law or authority referred to in that section.
(B) The licensee is liable for payment of the annual assessment described in section 1321.20 of the Revised Code an any loan made by the licensee which has been sold, transferred, or assigned to another person if servicing rights have been retained by the licensee.
Effective: November 13, 1997
The superintendent of financial institutions shall presume that all loans made by a licensee are made under the authority of sections 1321.01 to 1321.19 of the Revised Code unless it is clearly stated on the upper right-hand corner of the promissory note that the loan is made under another authority, whether state or federal.
Effective: November 13, 1997
(A) The language contained in division (G) of section l321.13 of tile Revised Code does not limit the rights of licensees to engage in other transactions with borrowers, provided the transactions are not a condition of the loan. "Condition of the loan" 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 right of licensees under division (F) of section 1321.13 of the Revised Code.
(B) The division of financial institutions will not interpret or construe any act or omission of a licensee to be in violation of sections 1321.01 to 1321.19 of the Revised Code if such act was taken or such omission was made in reliance on a written notice, interpretation or examination report from the division.
(C) The language contained in division (G) of section 1321.13 of the Revised Code permits licensees to use funds received from borrowers in amounts authorized by law to record, file or release security interest of a loan for purposes either of purchasing insurance to insure the licensee against losses for failure to record or file or creating a self-insurance fund to reimburse the licensee against losses for failure to record or file.
Effective: November 13, 1997