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Importance of Knowing the State Law for the Best Payday Loan that You Want to Avail

In the US, payday loans are governed by the state laws. When someone approaches for the best payday loan, the usual practice is to collect a post dated check of the total repayment amount beforehand from the customer. By doing so the company ensures that it does not have to go after the customer for the payment. If the check bounces due to insufficient balance the company can sue the borrower for the damages.

In California, the law, in this regard, is a little different than in other states. The law states that the company’s claim to damages is limited to the amount of check and a bounce fee of $15 or so. There are no further damages to be claimed or won. This situation is a different from the other states in that the amount of damages in case of check bounce in this business is treble of the amount in other states. So, the lenders can claim not only the check amount but also the extended damages.

But, why is the law the way it is in California? The reasoning behind this is that at the time of availing the best payday loan, the lenders know that the borrower does not have sufficient balance in his/her account. Despite this knowledge, they extend the cheap payday loan wanted by the borrowers. So, later on, when the post-dated check gets bounced, the lenders cannot claim extra damages for the risk they have undertaken willingly and in full knowledge of the facts. However, in case of other loans, the extent of damages to be won could be many times over the default sum.

A California company threatened the borrowers with court action if thrice the sum was not paid in case of bounce of the post dated check. It did not disclose in the court that the nature of loans it has extended to the borrowers are the instant payday loans and was, therefore, able to win damages of three times the sum of the post dated checks. It was discovered later by an attorney who filed a complaint with the court for the intimidation tactics and fraudulent inducement by the company of the courts into making the judgment without full disclosure of material information.

This case shows that the borrowers shall know the law of their state with respect to the best payday loan that they might seek anytime in future.

 

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Canadian Government Initiatives to Regulate Payday Loan Industry

A significant trend has been noticed in the mushrooming of Canada payday loan industry. Wherever the banks have not been giving the small amount loans to the needy people, the payday loan shops have come up sensing the requirements of the people. However, the consumer protection groups and even the government have been quite critical of the way these organizations carry on with their works. Therefore, the state and province governments have been bringing in legislation wherein the borrowers are given some respite from the high interest rates enabling them to come out of the spiral of debt.

Some of the main focus areas of regulations by the federal and State governments are:

1. Capping Interest rates: Some States have fixed the upper limits of the interest that can be charged from the customers. For example, Manitoba has a regulation for not charging more than $17per $100 of lending. Earlier, even the cheap payday loan came at $40 for every $100.

2. Ending the roll-overs and Extensions: Once you get into the debt trap, there is no room to escape because the interest is very high. So, you end up seeking more extensions or taking one more loan after paying off the earlier one. The government serious about ending this continued misery of the borrowers. It proposes a cooling off period between the back to back loans and this has to be longer than one pay cycle so that the borrower can try and pay off his debt with his pay.

3. Limits on amount of lending depending on the person’s ability to pay back. This can be fixed at a percentage of his salary. Say, a person will be able to get only 25% of his salary as a payday loan. Further, there might be stricter adherence for the verification check by the Canada Payday loan lenders in order to ascertain that the person has does not have other credit liabilities.

4. Tougher licensing norms: Licensing shall be made mandatory for this billion dollar industry. The government may ask for publication of complaints history, making public the corporate structure and ownership and regular reporting to the designated regulator.

With ever increased focus on the need of regulating this industry, it has become pertinent for the provincial governments to take concrete steps in this direction for the better protection of the consumers. It is time for the Canada payday loan industry to change the way business is being done.

 

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