Payday lending laws vary across different states. Many applicants are not aware that a payday loan may be illegal in their state. State and federal governments have pushed for tighter controls on payday loan stores because of the spiraling payday loan debt problem in the country.
Laws By State
Payday loans are legal in Alabama, Alaska, Arizona, California, Colorado, Idaho, Florida, Iowa, Indiana, Louisiana, Kansas, Minnesota, Michigan, Nebraska, Missouri, Montana, New Hampshire and Nevada. Arkansas, Delaware, Hawaii, Maine, Kentucky and Mississippi have restricted-use loans. Most of these six states allow transfer of funds only through checks. Maine allows only a few licensed lenders to operate payday loan stores and their transactions are monitored. Delaware and Connecticut allow payday loans under laws governing small loans to restrict their potential for misuse.
Payday lending laws in Georgia, Connecticut, Massachusetts, Maine, Maryland, and New Jersey completely ban operations of payday loan stores.
Payday lending laws put restrictions on the amount that can be borrowed, loan period, fees, number of simultaneous loans, rollovers, time between loans, and debt collection methods. These restrictions are meant to control debt crisis brought on by very high fees, short loan duration and unlimited rollovers. Aggressive debt collection techniques and threat of criminal lawsuit adds to the debtor’s unpleasant situation. Fast approval of payday loans one after the other can create a multiple-debt situation where the debtor needs to pay off more than one high interest loan. In this case you can opt for pay day consolidation.
In Alabama, for example, you cannot borrow more than $500 and the fee is capped a 17.5 percent. Only a single rollover is allowed and you cannot borrow a third loan within 24 hours of returning the second loan. In Arizona, three rollovers are allowed and you can borrow only one payday loan at a time. California does not allow any rollovers and if there is one, the interest rate or fee remains the same. Idaho allows not more than 25 percent of the borrower’s monthly salary to be extended as a loan. Kentucky allows maximum charges of 17.5 percent and APR no greater than 450 percent. Maine does not allow quick credits and the small loans you take out should have an APR of no more than three percent.
Need For Debt Consolidation
In spite of payday lending laws designed to protect consumers, people still fall into a debt trap. Multiple loans where allowed can snowball into a situation where you have two, three or even seven loans to repay, each with fee of around 17 percent. Do payday loans help or hinder if the payday lending laws are revised? They do keep consumers out of debt to an extent, but old habits die hard. If you use these loans to repay other debts or purchase non-essential goods and services, chances are that you will soon be in a bad debt trap. A payday loan debt settlement programs are hard because the debtor usually goes back to his or her old ways after clearing old dues. Therefore, any payday loan debt settlement plan must also take into account how to keep the debtor debt-free for longer periods. Payday loan debt consolidation can help you repay high interest loans and even save your creditworthiness. To avoid future troubles however, you need to stop using (or misusing) cash advances to support your lifestyle.
