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Laws Regarding Payday Loans

Author: nextdayche | Posted: 06.10.2008 | Views: 32

Wherever you look today, on television, on billboards, and on the internet you will find payday lenders. There are more and more payday lenders popping up every year. The growth in payday lenders is due to various factors one being that the larger lending companies are not providing small loans as the returns are lower which the costs for initiating the loan are about the same. The need was still there, however, smaller loan amounts were slowing disappearing in the industry. On the other hand, due to the various laws that put caps on interest rates on some of the mortgage loans, something had to break for the consumer, thus the creation of payday loan companies. However, along with payday loans came dishonest lenders that began taking advantage of the consumer. These lenders were not giving the true costs that were involved with payday loans such as the higher interest rate and other fees. Along with this there were also talking consumers into taking out several loans. All this did was put consumers deeper in debt and in a vicious cycle of robbing Peter to pay Paul so to speak. The dealings of these lenders brought on the need for reforms in the laws governing payday lenders.

Understanding the different categories

One category is that payday loan lenders are under the law of the state’s small loan laws also known s usury laws. In this case, the law places an interest rate of cap of up to 36% per year. Along with this the laws states the length of the loan, reporting regulations, and what is required or prohibited for the contract.

Another category allows the lenders to charge any interest rate or fees they desire as long as the lender and borrower agree.

The last category allows payday loan lending; however, specific licensing or registration will be required along with a bond or assets at a certain level. This category also states minimums and maximums for the amount of the loan and the length.

Each state is now putting into place various laws regarding payday loan lenders due to the consumer being taken by lenders that were adding so many fees and higher interest rates for the company itself to make a huge profit. The good news is that laws are now being put into effect that will help the consumer when they need a small payday loan for any type of emergency.

The creation of the payday loan was a great way for those needing to build their credit, needing quick cash in an emergency, or for those that had bad credit. Of course, there is always a bad apple out there to throw a wrench into a great deal. However, today, you will find honest and dependable payday loan lenders that will give you the cash you need in a matter of minutes. Yes, you will pay a bit higher interest rate than if you went with a conventional loan, however, with a conventional loan you will not receive the money quick and easy. With a payday loan, all you need is a job and a checking account.


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