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Views on payday loans in different states

Payday loans, those convenient short term loans that can tide you over from one paycheck to the next in an emergency, have become a source of controversy. On the one hand they are seen by many consumers as a quick and practical way to take care of short term financial crises. On the other hand, there are significant objections to the high fees and interest rates that tend to be associated with these short term personal loans.

Different opinions
The governing bodies of each state seem to have different opinions about payday loans and whether, and under what conditions, they should be permitted. Various states have passed legislation aimed at controlling the payday loan industry, but with no consistent results.

Consumer awareness
Consumers should be aware that online loans are not issued by banks, which are subject to strict regulation, but by private payday loan companies. Any given payday loan company is licensed by an individual state; if you are planning to take out a payday loan, make sure that the lender you are dealing with is licensed to provide loans to borrowers in the state where you reside.

Although various state and federal laws have attempted to control payday lenders through various legislative measures, including usury caps to limit interest charges APR (annual percentage rate) and other fees, there is no consistent view or policy on payday loans from one state to another.

Liberal policy
California is among the states with the most liberal policy regarding payday loans and their lenders. Yet even in the Golden State, where payday loans are an industry worth $3 billion annually, there is a great deal of discussion about stricter regulation of payday loans.

Legislation
A considerable number of American state governments have legislated against payday loans. Payday loans are banned altogether in 12 states, almost a third of the country.

However, the majority of payday loans these days are issued over the Internet by online payday loan companies. As individual state legislatures vote against payday loan companies, new lenders open up for business on the web. Because their operations are based either in states that are more receptive to payday lenders or in foreign countries such as Malta or Belize, these loan companies are not affected by the bans.

Other restrictions
Another, less drastic, measure to limit the use of payday loans has been put into effect in Florida, Illinois, Indiana, Michigan, North Dakota, New Mexico, Oklahoma, South Carolina and Virginia. These states have real time data bases which are employed to control the number of outstanding payday loans owed by an individual at the same time. Virginia and Washington have passed laws that will limit the number of loans each person is allowed to take within one year.

Banned states – 2013

  • Arkansas
  • Arizona
  • Connecticut
  • Georgia
  • Maryland
  • Massachusetts
  • New Jersey
  • New York
  • Pennsylvania
  • North Carolina
  • Vermont
  • West Virginia
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Grace Chen
Grace Chen - Writer & Editor
A graduate of the Haas School of Business, University of California, which is one of the top three (3) business schools in the U.S., Grace Chen has 10 years of experience in this field and have been delivering stellar business content through her written word. She’s the chief editor of Communicate Better and has written and edited thousands of content published in various online and printed media, including the NYSE-sponsored research studies and MEC Global. Connect with Grace on LinkedIn, https://www.linkedin.com/in/grace-chen-9254ab8/

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