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Today Consumers are protected by the AB 431 Bill, previously payday lending businesses didn't disclose their 500 to 2,000 annual percentage charges.

It wasn't until 1999, that a bill named "AB 431" was passed by the legislature which ordered payday loan businesses to disclose their annual percentage rates.

Nevada has no usury laws that prohibit charging high interests rates, but the federal Truth in Lending Act requires all lending institutions to clearly state what the interest rate is on a loan.

Fast cash lenders that provide short-term loans previously didn't come under that federal requirement. Since the passage of AB 431, they do.

Before that, most check-cashing lenders only informed customers of the flat fee - the cash amount - they were being charged.

Customers would give the lender a check for $360 and receive $300 cash in return. If the payday loan became due in one week, the lender would cash the check after seven days and make a profit of $60. However, the lender never disclosed that the $60 "flat fee" actually equals 20 percent a week, or an annual percentage rate of 1,040 percent.

The bill was an attempt to address some of the abuses in the growing payday loan industry across the industry.

Check-lending businesses usually provide short-term fast cash payday loans to high-risk customers in dire need of money, so their high interest rates are understandable, people in the financial industry say.

Not all check-lending companies take advantage of their customers however.

Most payday customers are among Nevada's lowest-paid workers. And, before the passage of AB 431, if a customer couldn't repay the loan, some lenders would urge them to continue the loan at high interest rates.

The companies would encourage the consumer to roll the payday loan over and they'd extend the loan for $20 each week. It can become a debt treadmill that many people cant get off.

These are the working poor, people who mainly work in the casino industry. Some individuals could pay $400 to borrow $200, and then were getting sued for $600 more in interest. So the company was trying to get them to pay $1,000 for a $200 Payday loan.

Under the law, once a customer defaults, the lender cannot charge more than the prime rate plus 10 percent on the original amount of the loan, rather than the 500 to 2,000 annual percent rates they had been charging,
To further protect consumers, the law prohibits lenders from making a loan that exceeds one-third of that person's monthly income unless the borrower can show they have additional funds coming from another source, such as an income tax refund.
"If people go into a bank, the bank judges whether they have the ability to pay. And if they're over their heads, they won't lend them the money. Most of the check-cashing businesses will loan anybody money, whether they can afford to borrow it or not.

AB 431 also prohibits paycheck-lending businesses from threatening people who default on their payday loans with criminal prosecution for check-writing fraud.

How many of these businesses work is they accept a post-dated check and in exchange, they give customers cash. Then if the customer is unable to repay the payday loan, they'll put the check through and threaten to prosecute them under the bad check law. They can't do that. It's a loan, not a bad check.

Bad-check laws are designed to protect merchants from people who write checks without sufficient funds in the bank with the intent of defrauding a business.

It doesn't protect lending companies that accept post-dated checks they know are not backed by money in the bank so they can then threaten customers who default with criminal prosecution rather than collection proceedings.


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