May 28

At least in the USA there are strict laws against predatory lending. All secured or unsecured loans offered at over 36% APR are informally classified as predatory lending in the USA. In most of the States in USA the Payday Loan companies can recover back their money at best with an APR of 36%. Yes the USA courts will allow garnishment of wages up to 40% of the defaulter’s paycheck but the Payday Lenders can not touch the primary residence or the retirement income or the child support income. Money can be recovered by the Payday Lender against the sale of the primary residence of the defaulter only if he/she on his own chooses to liquidate the asset. Default on Payday Loans is a civil offence and hence there are no criminal penalties against the defaulter. Law is definitely against the Payday Lenders and in most cases the only serious penalty is report the individual as a risky borrower to the national credit bureaus. This poor report of the defaulter remains active on file for only ten years and than he/she again comes out with a clean Slate/Credit record.

As the amount of default involved is small the Payday Lenders do not peruse the lengthy and costly process in the court of law. Most of the default loans are sold to credit collection agencies who try to recover the money thru follow up letters, calls and visits as it is again very difficult to follow the legal court procedure.
With most lending institutions, the bottom line of their business is to make a profit from their products and services and Payday loan companies are no different.

The primary reason for the existence of the Payday loan entities, are to address the needs of credit challenged clients that may have found resistance from traditional lenders. For this reason, Payday loan lending institutions take on a higher risk and pass this risk on to the client in the form of a higher APR.
Payday loan clients may have emergency situations that require immediate attention; they may not be in the position to borrow from family and friends; or they may simply need money to get from one pay period to the next. Whatever the circumstances may be, the bottom line is that the loan needs to be repaid and the APR should be considered in the repayment, which changes the repayment amount.

Part of the repayment process for payday loans, is that approved applicants maintain an active checking/savings account at the time of applying for the loan. This is to insure hassle free payday loans repayment, by allowing the lender to receive their payment (including APR) at the time of the client’s next direct deposit from their income.

In the event repayment is not made, according to varying federal and state laws, Payday loan companies CAN legally pursue repayment of the loan, however they must stay within the guidelines and ordinances of their operating local.

Payday loan companies have been under scrutiny in the past for excessive repayment fees, and this has caused for attention to be drawn to the operations of the companies, as in some cases they have requested up to three times the loan amount to be repaid.
By familiarizing yourself with the repayment process and fees, you will help avoid the discomfort of yet another creditor pursuing repayment. It should be remembered that Payday loan companies are designed to help individuals during a time of need. Borrower’s should respect this needed financial outlet, and be educated about the business, of doing business.

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