USA Payday Loans Regulations
Payday loans are short term loans that cover the unexpected and sudden expenses of a borrower till his next payday. They are often referred to as payday advance or paycheck advance. The rules and regulations associated with payday loans vary from one state to another in the U.S., as well as from one country to another. In some states, stringent usury limits are imposed which limit the nominal APR rate that can be charged by any lender, whereas some impose very few restraints on payday lending.
The Process Of Getting The Loan
Retail lending: In case of retail lending, the borrower visits a lending store and receives a cash loan of usually a small amount. The loan amount along with any interest has to be paid back when the borrower receives his next paycheck. The payday loan is issued at Annual Percentage Rates ranging between 390% and 780% per annum. A post dated check of the entire amount is issued by the borrower to the lender. The lender can cash the check on the next payday of the borrower.
Internet lending: Payday loans can also be received online. Here the borrower fills an application form on the lender’s website providing details such as the borrower’s personal information, social security number, bank account number as well as the employer information. Besides this, one is also require to furnish recent bank statement, copies of check and other paperwork duly signed. Once approved, the lender deposits the loan amount into the borrower’s bank account and receives the loan payment electronically on the next payday.
Laws And Regulations In USA On Payday Loans
The laws and regulations of the various lenders and lending institutions are individually handled by each state. Payday loans are considered legal in 37 states in the United States. In the other 12 states like Georgia, it is either not feasible or is considered to be illegal. If it is not completely banned, other regulations such as large interest rates or usury limits are used to prohibit payday lending.
Most of the states in USA have usury laws that specify a particular APR beyond which the interest rate cannot be increased. As per the usury laws, the loan fees of all kind have to be a part of the interest because any amount can be charged as fees by the lenders otherwise. According to the U.S. state laws, charging of any fees besides those permitted by the law is prohibited.
In some states such as Michigan, Florida, North Dakota, Illinois and Indiana, there are laws regulating the number of loans permissible for a single borrower at a particular time. As per this system, the lender must carry out verification to judge the borrower’s ability to payback the loan amount.
Regulations in Various States
District of Columbia: As per the payday regulations in District of Columbia, lenders cannot charge more than 24% interest rate.
Georgia: In Georgia, payday lending was banned over 100 years ago.
New Mexico: The payday regulations in New Mexico restrict the total number of loans that can be availed by any borrower. They prohibit loan rollover according to which the borrowers can not take new loans in order to pay the previous ones.
Always be sure to check current and local laws, this information is subject to change.