Payday Loan Usury Laws: Revolving Cycle of Debt

More than five million American families pay checks to payday lenders every year. A payday loan can be considered as an advance payment of your upcoming pay that is given to you for a certain fee. The amount borrowed can range from $100 to $1000, for a high interest fee ranging up to 300% or even more.

In some states, it is easier to find a payday lender than a fast food chain. Usury laws, considered to be the first consumer laws are used to protect consumers from predatory lenders, that charge very high interest rates for a short-term payday loan.usury laws

According to the federal Truth in Lending Act (TILA), a payday loan company must disclose the cost of their loans as a fee and as an annual percentage rate (APR). Under the Truth in Lending Act, banks acting as consumer lenders must ensure that accurate disclosures are provided to clients. Usury laws regulate payday loans in 37 states. These regulations specify the maximum interest rate at which loans can be given. Most of the states have usury laws including special usury laws such as small loan acts.

In twenty states, the Virgin Islands and Puerto Rico, a payday company is required to abide by the state’s usury laws that fix the highest interest rates ceiling at 36% per year. These usury laws often contain regulations regarding the maximum and minimum term, the maximum interest rate and permissible charges, the maximum loan amount, penalties for charging unlawful interest and for other violations, required contract provisions, licensing requirements, and prohibited contract provisions. In contrast, a payday loan company is exempted from usury laws in 19 states and the District of Columbia.

A payday loan company that charges any amount that is greater than the legal interest rate will not be allowed to sue to recover any debt due to the illegality of the interest rate.

In short, predatory lending is costing families billions of dollars each year. Usury laws are aimed at tracking down and stopping lenders from charging ridiculously high prices

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One Response to “Payday Loan Usury Laws: Revolving Cycle of Debt”

  1. Borrow Money says:

    Payday loans aren’t as bad as people make them out to be. If the person has a steady job and follows their guidelines they should have the means to pay back the loan; it’s as simple as that. Thank you for the enjoyable read.

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