The Legality of Payday Loans: Where Lenders Are Allowed to Advance Cash
Payday loans advance cash to help people in financial need. But not everyone considers payday lenders to be ethical. In fact, opponents increase efforts to increase regulations governing short term lender every several years. Payday loans not actually allowed in all 50 U.S. States. A lot of people ask “Are payday loans legal?” You have to do the research and learn more about the payday loan laws that operate in your state.
The States That Allow Payday Loans
Twenty seven states allow short term lending. These payday lenders advance cash at an Annual Percentage Rate (APR) of 391% up to 521% or higher.
Maximum loan amounts, terms and finance charges vary by state. In Alabama, the maximum loan amount you can borrow is $500, and the maximum loan term is 31 days. The maximum payday loan amount is $300, in California, while the maximum term is 31 days and the deferred deposit fee cannot exceed 15%.
The States That Do Not Allow Payday Loans
There are 14 states that do not allow payday lending. The states are Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, Montana, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia.
In these states, the maximum APR cannot exceed 36%. Interest rates are capped at 24% to 50% on average, which are the same rates offered at many banks and credit unions. The practice of payday lending is a felony in some states and could result in class action lawsuits, and even racketeering charges.
Hybrid States: Are Payday Loans Legal?
The answer is yes and no. There are 9 hybrid states that allow restricted forms of short-term lending. Lenders still advance cash on a short term basis, but there are more restrictions on the loan terms and fees. Lenders still charge APRs as high as 100%, but on average, consumers cannot borrow more than 8 loans per year. Also, borrowers must have reasonably long periods to repay the loans.
Where to File Complaints
It is easy to know whether or not a lender is a loan shark. Usury is the common feature among all predatory lenders. Usury is the practice of charging excessive interest rates for loans. States that allows payday lenders still closely monitor their operations to identify and punish usury practices. In each state, there are limits to the loan amounts, interest rates, repayment terms, etc.
If you suspect a lender had agreed to advance cash illegally, you can file a complaint. The Consumer Financial Protection Bureau (CFPB) is the official regulator of all payday lenders in the U.S. and enforces the law against unlawfully businesses. Submit a complaint on their website or call (855) 411-2372 if you have questions. Visit their website for more information and find out “are payday loans legal?” in your state.
As a consumer, file a complaint against the company on the Better Business Bureau website or contact the Federal Trade Commission. In your state, contact the office of the attorney general or consumer affairs.
In many states, consumers can only have one loan outstanding at any given time. A loan shark does not perform a credit check. The borrower must be eligible to repay the loan, and the lender must verify his or her employment.
After several loan renewals, the lender must offer you a longer repayment period with lowered interest rates. Debt slavery is a possibility for anyone who borrows short-term, high-interest loans. Payday loan laws are there to ensure that debtors do not remain in debt forever.
The Truth in Lending Act requires all terms and conditions must be stated on the lender’s website. In some states and the District of Columbia, a license is required to operate this type of business. In New Mexico, the rollover, in which you borrow a new loan to pay off an old one, is prohibited.
It is necessary to do your research carefully, because the payday loan laws are different in each state.
Many people wonder “are payday loans legal” and “where can I get one?” Know that these types of loans are not legal everywhere. Payday loan laws restrict the activities of businesses that could prey on the needy, if left unchecked. While for some people, the term payday lender is synonymous with a loan shark, using legal short term lenders does leave you with recourse in a dispute.