Summary: Regulating Payday Loans

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Regulating the Payday Loan Industry Business Law I, MG260 Regulating the Payday Loan Industry I. Introduction- Attention gaining story about Johnny and his payday loans A. Statistics II. Payday loans A. Explain what they are 1. short term loans- normally 2 weeks 2. extremely high interest rates (a) up to 400% annually B. Who uses payday loans III. Federal laws and regulations A. A 2006 law prohibited payday lending to active duty military and families B. Payday Lending Limitation Act of 2010 1. Intended to put national limitations on payday lenders 2. Bill failed to pass leaving limitations to state regulators IV. State and local regulations A. NC General Statue title 53, Article 15 1. Kucan v. Advance…show more content…
They see the short-term loan as a quick fix that can get them through to the next payday. These lenders don’t require any kind of credit check or form of collateral. A user can walk into a payday loan shop with some identification, a recent paystub, and a check and literally walk out 15 minutes later with cash in hand. Researchers argue that many payday loan customers may not even know what an APR is, let alone have any basis for judging whether 400 percent is high or low (Fisman, 2009). Things start to spiral out of control when borrowers are unable to make their payment. Often times, feeling the pinch when the money comes due, borrowers will go back to the payday loan shop and take out another loan to cover their first loan. As time goes by borrowers have had to do this multiple times to keep the loans in good standings. It’s believed that up to 60 percent of payday lender customers have taken out 12 loans in the past year- meaning that they likely are repeatedly borrowing to pay the previous loan (Barrett,…show more content…
The business claimed that the highly advertised delay to deposit the check was not a solicitation to make a loan. These payday lenders required the consumer to sign a statement saying that they had the funds in their account to cover the check, even though they were verbally told otherwise by the lender. The payday lenders claim that they are not making loans but that their customers are simply paying a high fee because of the convenience of cashing a check at their store. This was a feeble excuse with the presence of banks and ATMs throughout the area, why would someone pay a high fee to cash a check? Finally, the last method used to get through the legal requirement of the North Carolina Consumer Finance Act has been the claim that the payday lender is really an out of state bank and that they are exempt from North Carolina law. However, under Federal law 12 U.S.C. 1831d, states cannot limit interest rates imported by out of state banks (Federal Deposit Insurance Corparation, 1980). Therefore payday lenders maintain a business relationship with out of state banks and then claim that under Federal law the lending bank can import that out of state rate into North

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