On October 31, 2025, the Ohio Division of Financial Institutions (DFI) announced significant updates to its guidance regarding bank loan arrangers under the Small Loan Act. This move reverses earlier interpretations from December 2024 and January 2025, which mandated that nonbank entities involved in arranging consumer loans of $5,000 or less for compensation, including loans from federally insured banks, obtain a state license. The DFI’s latest guidance suspends this licensing requirement, providing immediate relief to affected parties.
The updated guidance outlines a series of important clarifications regarding licensing and enforcement. First, nonbank entities that arrange bank loans for compensation, irrespective of the loan amount, will not need to secure a license under the Small Loan Act until further notice. This suspension allows these entities to operate without the burden of regulatory compliance in the short term.
Additionally, the DFI has introduced an exemption for interest-free small loans. Companies that either make or arrange loans of $5,000 or less without charging interest will be exempt from licensing requirements during the calendar years 2025 and 2026. This exemption is particularly relevant for organizations looking to offer flexible lending options without incurring regulatory complications.
Another significant aspect of this guidance is the DFI’s decision not to enforce any provisions of the Small Loan Act against activities that are now exempt from licensing. This means that organizations that engaged in unlicensed activities in 2025 will not face penalties, further easing the regulatory landscape for marketplace lending platforms and other nonbank participants that rely on bank partnerships.
This reversal by the DFI is a considerable development for companies operating in the financial services sector, particularly those engaged in marketplace lending. With these changes, the DFI aims to eliminate uncertainty surrounding licensing requirements in Ohio, granting regulatory relief as the Division continues to reassess its policies.
As companies operating across various jurisdictions navigate this shifting regulatory environment, it is essential for them to stay informed about potential state-level developments. Organizations should evaluate their current structures for compliance and be prepared to adapt quickly as regulatory oversight evolves into 2026 and beyond. The DFI’s latest guidance not only affects businesses in Ohio but could also have wider implications for the lending landscape in other regions.
In conclusion, the Ohio DFI’s decision to suspend licensing for bank loan arrangers marks a noteworthy shift in the regulatory approach towards nonbank lending entities. By providing clarity and regulatory relief, the DFI is facilitating a more flexible environment for financial innovation while continuing to evaluate its regulatory framework.
