|
|
| |
| |
| |
| |
| |
| |
| |
|
|
|
|
|
| |
|
|
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.
|
|
| |
| |
| |
|
|
|
| |
| |
| |
©
2003 - 2004 Payless Bills, Inc. All Rights Reserved. PaylessBills!com is a
registered trademark.
Payday Loan State Resources:
Illinois
- Oregon
- Utah |
|
| |
|
