On October 31, 2024, the Ohio Division of Financial Institutions (DFI) announced a major shift in its regulatory stance regarding nonbank entities that arrange consumer loans under the state’s Small Loan Act. This updated guidance reverses earlier interpretations issued in December 2024 and January 2025, which mandated that any nonbank organization receiving compensation for arranging consumer loans of $5,000 or less would need to obtain a state license. The latest development effectively suspends this licensing requirement for the foreseeable future.
The DFI’s revised guidance outlines several key points:
Suspension of Licensing Requirements
Nonbank entities that facilitate bank loans, irrespective of the loan amount, will not be obligated to secure a license under the Small Loan Act. This suspension remains in effect until further notice from the DFI. This move provides immediate regulatory relief to entities involved in marketplace lending and related sectors, allowing them to operate without the burden of licensing.
Clarifications on Exemptions
Additionally, the DFI specified that entities arranging or providing interest-free loans of $5,000 or less will be exempt from licensing requirements for the calendar years 2025 and 2026. This exemption offers further clarity to potential lenders and reinforces the DFI’s intent to streamline the lending process in Ohio.
Moreover, the DFI will not enforce any provisions of the Small Loan Act against activities that have now been exempted from licensure. Entities that previously operated without a license for these activities in 2025 will not face penalties or enforcement actions.
The DFI’s decision represents a significant change in the regulatory landscape for nonbank participants relying on partnerships with federally insured banks. It alleviates immediate concerns regarding licensing status in Ohio, as the Division continues to assess its overall regulatory framework.
As the DFI evaluates its approach, companies operating across different jurisdictions should remain vigilant about potential changes at the state level. They must ensure compliance with current regulations and be prepared to adapt quickly to any new directives from regulators as they evolve into 2026 and beyond.
