Payday loans are notorious for having astronomical interest rates. If, for example, you take out a payday loan for $300, if you have bad credit, then payday loan companies may try to charge you an annual interest rate of up to 300%! There has to be a law against that, right? Well that’s where the Fair Debt Collection Practices Act comes in.
The FDCPA, or Fair Debt Collection Practices Act, is a United States statute which outlines how debt collectors are allowed to do business through eliminating unfair and often, abusive practices concerning the collection of consumer debts. This statute also promotes fair debt collection and provides consumers with a way to dispute and obtain validation of debt in order to ensure the accuracy of the information. In short, the Fair Debt Collection Practices Act saves you from bullies who might try to collect a debt that is much more than what you owe, or something that you don’t owe at all.
How Does the Fair Debt Collection Practices Act Affect Me?
Prior to payday lending laws, lenders charged pretty much whatever they wanted. As usual, people with bad credit or no credit at all, were the ones most affected by this, as lenders would often charge them annual interest rates of up to 900%. But they wouldn’t know this until it was too late because the fees would be buried deep within a load of legal jargon that nobody could understand. In 1978, the Fair Debt Collection Practices Act changed all that by forcing loan companies to be forthright in stating their fees and practices.
State payday loan laws keep these interest rates in check, but often, payday loan companies disregard these laws entirely. More than 30 states have payday lending laws which limit the interest rate a company can charge you. For instance, in Georgia the annual rate is 15% interest. In New York, the annual interest rate cannot exceed more than 25%. Payday loan laws are crucial in keeping in check payday loan companies that only want to cost you more and more money until you have run yourself into the financial hole you dug unintentionally.
Under the Fair Debt Collection Practices Act, all state payday loan laws state that the lender must have his/her contract written in clear understandable English. This contract must also have the fees upfront and in bold typeface print so the consumer can see how much they must pay to the loan company. If any of these things are not present within the contract, then the loan company is breaking their state’s payday lending laws and you should report them to the proper authorities immediately.
Fair payday loan laws are a very recent occurrence, and without the Fair Debt Collection Practices Act they never would have been implemented. Be sure to always check your state’s payday lending laws so you can avoid being ripped off when you can’t afford it.