The payday loan cycle is a well-known one for many. A person needs money for an unexpected expense, an extra couple hundred dollars to cover them until their next paycheck. With a payday loan, they get their money on the spot. The trouble comes later when payment is due on the loan. If a borrower defaults on the loan, the loan is rolled over and the fees start to rack up.
Approximately 25% of Americans live paycheck to paycheck, according to a survey by Bankrate. About 19 million American households (nearly one out of every six in the country) have taken out a payday loan at some point.
You see the signs everywhere with storefronts offering ‘FAST CASH,’ even online lenders offering access to cash next day, with only a signature as a promise to pay. A payday loan is also referred to as a paycheck advance or cash advance. These loans are short-term ones that are to be repaid by the time someone receives their next paycheck. In exchange for the loan, the payday lender will charge a fee on top of any interest on the amount borrowed. Normally, payday lenders do not run a full credit check on the borrower, and due to the riskier nature of the loan, they tend to come with significantly high interest rates.
Because of the risk involved and the disadvantage to the borrowers taking on these loans, many states do not allow payday loans at all, while others will limit how high the annual percentage rate (APR) can be. Others prefer to not restrict lenders, which means the APRs can be anywhere from 300 percent to 900 percent!
If you are not able to pay your loan off at the end of your loan period, it will often roll over to the following payday, which means your debt will just continue to grow until it is an amount you can no longer handle.
The problem with payday lenders is they tend to target lower-income borrowers. The Consumer Financial Protection Bureau (CFPB) has fought hard in the past to protect borrowers from the predatory lending tactics of payday lenders, but this fact has changed since the start of the Trump administration. In fact, after Mick Mulvaney took over for the CFPB after the 2016 election, the restrictions on payday lenders have decreased significantly.
Efforts were made recently in the U.S. House of Representatives to protect borrowers from this type of predatory lending when the “For the People Act” was passed. However, Senate Majority Leader, Mitch McConnell, has refused to allow this measure to be brought up in the Senate.
One of the last regulations published under President Obama’s director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, was a 2017 rule that would have curbed the most-predatory forms of payday lending. The Trump administration has proposed to revise that rule—aiming to eliminate a powerful provision designed to protect borrowers.
The State of Florida does allow payday loans, but certain restrictions are enforced, including the following:
- The borrower can only take out up to $500 per loan and can only have one outstanding loan at a time;
- The maximum fee that a lender can charge is 10 percent of the total amount borrowed, as well as a $5.00 verification fee;
- The loan contract cannot be for more than 31 days and cannot be for less than seven days;
- Contract terms that would limit your rights as a borrower are not allowed;
- The borrower must pay a previous loan off in full and wait a full 24 hours before being granted another loan; and
- If the borrower cannot pay the loan in full at the end of the term, the lender must give the borrower a 60-day grace period without additional charge.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
Related Resource:
https://prospect.org/article/thanks-trump-payday-lenders-will-keep-on-merrily-bilking-poor
