Elevate Explains Why Ohio Payday Law Won’t Hurt Them

In Elevate’s Q2 2018 conference call yesterday, Chairman and CEO Kenneth Rees mentioned that Elevate wasn’t worried about an Ohio bill, signed into law yesterday, that places significant restrictions on what payday lenders can do in the state.

The Fairness in Lending Act (House Bill 123) will close a loophole that payday lenders have been using to bypass the state’s 28 percent maximum APR on loans. The law will go into effect at the end of October of this year.

“We don’t believe this legislation will have a material impact on our business for a couple of reasons,” Rees said on the earnings call. “First, the law would only impact our RISE product…and we believe we can migrate most of our RISE customers in Ohio into an Elastic loan or a Today Credit Card.”

Elevate’s RISE product provides unsecured installment loans and lines of credit, while the company’s Elastic product, its most popular, is a bank issued line of credit. Elevate’s Today Credit Card, a partnership with Mastercard, was just launched and is unique in that it offers prime-like features to subprime customers.

The other reason why Rees is not very concerned about the new law is because he said that that RISE Ohio only represents less than five percent of the company’s total consolidated loan balances. Rees said that there may even be opportunity resulting from Ohio’s new Fairness in Lending Act because he said the law will likely reduce credit availability, potentially creating increased demand for Elevate’s Elastic and Today Card products, which he indicated would be acceptable under the new law. The new law does the following:

• Limits loans to a maximum of $1,000.
• Limits loan terms to 12 months.
• Caps the cost of the loan – fees and interest – to 60 percent of the loan’s original principal.
• Prohibits loans under 90 days unless the monthly payment is not more than 7 percent of a borrower’s monthly net income or 6 percent of gross income.
• Prohibits borrowers from carrying more than a $2,500 outstanding principal across several loans. Payday lenders would have to make their best effort to check their commonly available data to figure out where else people might have loans. The bill also authorizes the state to create a database for lenders to consult.
• Allows lenders to charge a monthly maintenance fee that’s the lesser of 10 percent of the loan’s principal or $30.
• Requires lenders to provide the consumers with a sample repayment schedule based on affordability for loans that last longer than 90 days.
• Prohibits harassing phone calls from lenders.
• Requires lenders to provide loan cost information orally and in writing.
• Gives borrowers 72 hours to change their minds about the loans and return the money, without paying any fees.

Apart from brief discussion of the minimal impact of this new Ohio law, Elevate shared its Q2 revenue of $184.4 million, a 22.5 percent increase over last year at the same time.   

Todd Stone was a reporter for deBanked.