In Ohio Neighborhood Finance, Inc. v. McGeorge (2011), Summit County No. 10-CVF-0404, 2011-Ohio-577 (Feb. 9, 2011) the Court of Appeals held that a lender registered with the Ohio Department of Commerce, Division of Financial Institutions pursuant to the Ohio Mortgage Loan Act (“OMLA”) was entitled to 25% interest on a customer loan and not the statutory default rate of 4%. The loan at issue in Ohio Neighborhood Finance was for $500 to a Cashland customer. Defendant Rebecca McGeorge obtained the $500 loan and signed a customer agreement that included financing at a interest rate of 25% per annum. When Cashland attempted to withdraw the money owed by Ms. McGeorge, Ms. McGeorge’s bank account had insufficient funds, and no withdraw could be made. Including fees, Ms. McGeorge owed $563.11. Cashland filed suit for money owed, and when Ms. McGeorge failed to respond following service, Cashland moved for a default judgment.
The trial court awarded a default judgment to Cashland, but awarded interest at the statutory rate of 4 percent. Cashland appealed, arguing that in addition to judgment, it was entitled to 25% interest, because the contract between the parties stipulated in writing that McGeorge would owe 25% interest. The Court reversed and modified the judgment, finding that the trial court erred in disregarding the contractual stipulation. Under R.C. 1321.571 a registrant of the OMLA may charge an interest rate up to 25%. Under R.C. 1343.03(A) a creditor is entitled to a contractual rate of interest instead of a statutory rate when the parties have a written contract and the contract provides a rate of interest. The court found that under Ohio law and and the contract, Cashland was entitled to judgment plus 25% interest. In concurring, Judge J. Carr wrote that “[t]he legislature has spoken on this issue and has enacted legislation that allows interest at a rate of up to 25 percent. Although I may not agree with the result and question its fairness, I am bound nonetheless.”