Internet Payday Loan Regulations
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Payday loans are short-term cash advance loans provided to customers at exorbitantly high interest rates. Earlier payday loans were only available at pawn shops, check cashing outlets and few payday loan outlets.
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With the technological advancements that have taken place during the 20th and 21st century, it is now possible to obtain a payday loan from an online payday lender. According to an industry estimate, there are more than 3000 websites delivering payday loans online, a number that is increasing rapidly.
In order to protect interests of the consumers and also to regulate cyberspace lenders, many states have introduced certain regulations to govern online payday loans. Some of these are listed below.
- Online payday lenders must not charge customers with a service fee. This regulation is applicable in almost all the 37 states in the U.S.
- Online payday lenders must abide by the Truth in Lending Act. As per this regulation, lenders must reveal all the information about the loan to the customer. This includes the annual percentage rate and any other miscellaneous costs that are included by the lender during the course of the loan.
- Rollovers and loan renewals that are mostly common in online payday lending are prohibited under several state laws.
Ironically, most internet payday lenders tend to bypass all the state usury laws and other consumer protections by registering themselves in tax regulatory states. Thereby, these lenders are not liable to comply with the licensing requirements or state protections present in the borrower’s home state. As a result, this provides an ample chance and opportunity for consumer abuse.
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