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The Top 3 Payday Advance Loan Safeguards in 2009

[Mar 23, 2009.]


Nobody is more aware of the negative reputation that payday loans carry than the lenders themselves. Well, perhaps the federal government does, as well. And this year the feds are working to situate meaningful safeguards in payday advance loans that protect the consumer in more ways than ever. Lower interest rates, rational loan caps and longer return periods are resulting in a more sensible generation of loans. How do the lenders feel about it? They’re thrilled--the better their image, the more business they do. It’s a win-win for everyone involved.

1. No More Hidden Fees. Canada seems to be taking the high road with respect to payday loan fees. According to the BC Local News, lenders have reported an increase in their borrowers to the tune of almost 40%. That might be because local and regional laws dictate the listing of fees plainly in addition to limiting the amount of money lent to the customer. In most cases, no more than 50 percent of a paycheck may be matched and no more than 23 percent can be charged on a short-term loan.

2. Lending Interest Capped. The Missoulian Online News describes the timeline of legislation that has worked to prevent unscrupulous lenders from trapping borrowers into a cycle of inescapable debt. Congress imposed a 36 percent cap for military personnel in 2006. 15 additional states capped their payday lending rates at 36 percent in 2007. And these caps are proving invaluable. With a large population of workers in the business in every state, closing payday loan lenders would throw the industry into further disarray.

3. Stopping the Collections Harassment. This sticking point, perhaps more than all others combined, is responsible for giving payday lending such an ominous status. Horror stories of endless phone calls at work and throughout the night, dangerous repo attempts, and other misadventures is simply not the way legitimate lenders do business. The Gallup Independent reminds us of the pertinence of the Fair Debt Collection Practices Act that prohibits debt collectors from backhanded or overbearing collection tactics.

Obviously these changes are neither the answer nor the end of the story, but they’re certainly steps in the proper direction. Time and the industry will continue to combine to reform payday advance loans for the better. And as they do, payday lending will inch closer to the level of traditional bank offerings.


BC Local News, No more hidden charges on payday loans
Gallup Independent, Law bans harassment in loan collection
Missoulian News Online, Legislature 2009: Lawmakers mull cap on lending interest


About Author:

Kelly Richardson is a freelance writer, marcomm consultant and digital entrepreneur. He’s written content for Fortune 500s Google, Yahoo!, Microsoft and Wells Fargo. Find out more about him at kellyrichardsoncopywriting.com.

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