Several states have set caps on payday loan fees and that’s good news for people who need this type of short term financial assistance. These caps limit the amounts that payday loan originators can charge for such loans, also known as direct deposit cash advances. Though several states have set caps on payday loan fees, many have not taken this steps. Here are a few reasons why you should care.
The way it used to be
Before states began setting caps on payday loan fees, the fees being charged by a small minority of lenders were excessive. Some people who needed a loan and did not bother to look for a better deal from another lender agreed to the high fees. Occasionally, they found they were deeper in debt than they needed to be as a result.
One thing that’s important to understand is that even though several states set caps on payday loan fees, only lenders that have completed the steps required to register and become licensed to do business in such states have committed to abide by the payday loan fee caps. Companies can still conduct business in a state that has set caps on payday loan fees even though they’re not licensed and registered in that state. Borrowers are advised to avoid these firms since the level of consumer protection afforded by them is unknown.
Choose your payday loans company wisely
If you’re considering applying for a payday loan, don’t patronize the unregistered businesses but look for those that are licensed to operate in your state. If the company has taken the time, effort, and expense to register to do business in a particular state and, in doing so, agree to abide by that state’s laws governing payday loans, there’s a good chance you’ll be treat fairly and honorably by that company.
Whether you pay attention to the payday loan company’s licensing and registration in your state, it is critical that you be sure that you fully understand the terms of the payday loan before you agree to it. If you have questions, ask. That’s the only way that you can protect yourself against being charged interest rates and fees that you cannot afford and perhaps finding that you have put yourself in a bigger financial predicament than you were before.
Another reason why you should care that several states have set caps on payday loans is because you’ll have that state’s government on your side should you need it. It’s unlikely that you’ll encounter a problem with fees on your payday loan, but, if you do, you’ll want help in dealing with the situation. With the state on your side, you’ll be able to make a better case against what you feel may have been unfair business practices.
States set caps on payday loans fees to protect consumers, not payday loan business owners. These states also want to protect consumers against becoming victims of fraudulent lending and similar abuses. Contact your state’s Department of Banking if you feel that you have been such a victim.