US Battle Against Payday Loans

Another US State government just decided to tighten the regulations of payday loans or cash advances. For borrowers and potential borrowers this is good news. The new regulations are focusing mainly on the amount of interest that they lenders are allowed to charge. For many years this has been going on where more and more states have passed new legislation to heavily regulate how cash advance lenders can operate. Even in one of the states a recent regulation made it illegal for payday lenders to give out such loans.

Montana is going to cap the interest rates of payday loans and cash advance loans at 36 percent. This will be public in the November election ballot. Supporters of the measure managed to collect more than 27,000 signatures of registered voters in 54 districts across Montana. However, there are critics going around accusing these supporters of illegally gathering the signatures because “the petition did not include the full text of the measure”. In the end, a judge ruled in favor of the measure’s supporters. By this, voters are now able to decide whether the 36 percent rate-cap should become law.

However sweet the news may sound in the ears of borrowers, Montana has already been regulating these small short-term payday loans. Gazette opinion writes:

Loans can’t exceed 25 percent of the borrower’s verifiable monthly take-home income, can’t exceed $300 in any case and can’t be made for a term longer than one month. The loan fee can’t exceed 25 percent of the loan. Thus a $300 loan with a $75 fee is the maximum allowed by law.

Montana law also limits payday loans to one per person. To get the cash, the borrower writes the lender a postdated check that will be cashed on that date not more than a month in the future. By law, a borrower isn’t allowed to take out a second payday loan with any lender until the first one is actually paid off.

Payday lenders are regulated by the Montana Division of Banking. Payday lenders must be licensed, must submit annual reports on their operations and are examined annually by the banking division. (Source: Gazette Opinion)

More regulations in addition to these may eventually kill off the payday loans industry in Montana. Consumers turn to these small loans when they have run out of other options to get loans. In many cases, payday loans are the only thing helping them to keep their power from shutting off or losing their telephone service. Although these loans are not the most perfect loans they can get, they are helping a lot of people. Any regulations towards killing the payday loan industry may eventually kill a lot more.