What Are Short Term Loans?
Why Do People Need Small Short Term Loans?
What Are The Regulations For Short Term/Payday Loans?
Payday loans are small loans subject to state regulation. Traditionally states have capped small loan rates at 24 to 48 percent annual interest and required installment repayment schedules. Many states also have criminal usury laws to protect consumers.
Payday loans at triple-digit rates and due in full on the next payday are legal in states where legislatures either deregulated small loans or exempted payday loans from traditional small loan or usury laws and/or enacted legislation to authorize loans based on holding the borrower’s check or electronic payment from a bank account.
Eighteen States and the District of Columbia Prohibit Extremely High Cost Payday Lending
States protect their citizens from usurious payday lending by prohibiting the product or by setting rate caps or usury limits.
Georgia prohibits payday loans under racketeering laws. New York and New Jersey prohibit payday lending through criminal usury statutes, limiting loans to 25 percent and 30 percent annual interest, respectively. Arkansas’s state constitution caps loan rates at 17 percent annual interest.
After permitting high-cost payday loans, New Hampshire capped payday loan rates at 36 percent annual interest in 2009. Montana voters passed a ballot initiative in 2010 to cap loan rates at 36 percent annual interest, effective in 2011. South Dakota voters approved a ballot initiative in 2016 by a 75 percent vote to cap rates for payday, car title and installment loans at 36 percent annual interest. Arizona voters rejected a payday loan ballot initiative in 2008, leading to sunset of the authorizing law in 2010. North Carolina tried payday lending for a few years, then let the authorizing law expire after loans were found to trap borrowers in debt. The states of Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, and West Virginia never authorized payday loans. The District of Columbia repealed its payday law.
Three States Permit Lower-Cost Payday Lending
Small loans secured by access to the borrower’s bank account are authorized in three states at lower than typical rates. Maine caps interest at 30 percent but permits tiered fees that result in up to 261 percent annual rates for a two-week $250 loan. Oregon permits a one-month minimum term payday loan at 36 percent interest plus a $10 per $100 borrowed initial loan fees. As a result, a $250 one-month loan costs 154 percent annual interest for the initial loan, and 36 percent for any subsequent loans. Colorado amended its payday loan law in 2010 to set a minimum six-month term for loans based on checks held by the lender. A Colorado payday loan may include charges of 45 percent per annum interest, a monthly maintenance fee of 7.5 percent per month after the first month, and a tiered system of finance charges, with 20 percent for the first $300 borrower and an additional 7.5 percent for amounts from $301 to $500. Loans can be prepaid at any time with a rebate of unearned fees, repaid in installments, or repaid in one lump sum.
Thirty-Two States Authorize High-Cost Payday Lending
Thirty-two states either enacted legislation authorizing payday loans, failed to close loopholes exploited by the industry to make high-cost loans, or deregulated small loan interest rate caps.
Payday loan states include: Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.
Payday lending is legal in Ohio despite a ballot vote in 2008 that capped rates. The industry switched to lending under other laws which was upheld by the courts and not corrected by the Ohio legislature.
Some authorizing states somewhat limit debt-trap risks. For example, Washington limits borrowers to eight payday loans per year. Virginia requires loans to be payable in two pay cycles; however, lenders evade protections in Virginia by structuring loans as unregulated open-end lines of credit.
The above information was brought to you by https://paydayloaninfo.org/, please visit their site for a better understanding of the lending industry in the USA and remember Payday loans are extremely expensive cash advances that must be repaid in full on the borrower’s next payday to keep the personal check required to secure the loan from bouncing. Cash-strapped consumers run the risk of becoming trapped in repeat borrowing due to triple-digit interest rates, un-affordable repayment terms, and coercive collection tactics made possible by check-holding.
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