Payday loans are interesting because they are loans but they are not always subject to the same laws as traditional loans. The difference in how the loans are considered legally has left a lot of consumers confused about exactly what they are getting into, and what their recourse is when they have been wronged by payday loan provider. It has only been in the last ten years that payday loan laws have been put into practice, but in this time the laws have saved a lot of people a lot of stress, time, and money.
Understanding Payday Loan Laws
If you used a payday loan before 2000 or so you might have been charged way more in interest than you should have been. In fact, in many cases people were paying almost as much in interest as they were in actual funds borrowed. The payday loan providers were able to get away with this because there were not any laws that applied directly to them. Instead, there were laws out there that governed traditional lending institutions, and so the payday loan loophole was created, allowing for some to make huge profits and for some to lose money hand over fist.
Payday loan laws are there to protect the consumer, not the business. Some of the benefits of payday loan laws are:
The federal government had to step in and ensure that consumers were not being robbed blind when using payday loans and this is where the idea of payday loan laws came from. Today, most states have their own payday loan laws that they have enacted to help their citizens. Most states still allow for payday loan laws, there are just limits as to how much can be charged and also laws ensuring that the consumer is informed about the cost of these loans before they sign on the dotted line and are handed their cash. Payday loan laws have protected unknown numbers of citizens that may have fallen prey to the harsh and unfair interest rates that were associated with these loans in the past.
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