Many consumers who need cash quickly turn to short-term payday loans or secured Title Loans. These loan types provide quick cash but at rather high annual percentage rate.
That’s why the FTC and CFPB put up a variety of short-term loan laws and regulations to protect consumers. Payday lenders engaged in deceptive or unfair lending or abusive debt collection practices are considered scammers and are subject to the federal consumer protection laws.
These laws concern short-term loans based on personal checks held for future deposit or on electronic access to personal checking accounts as well as other loan products designed to be alternatives to payday lending, for example, Car Title Loans.
Payday Loan Laws
Payday loans are small loans subject to the federal and state regulation. States usually cap small loaninterest rates at 24 – 48% APR. Many states also have criminal usury laws to protect consumers. Some states even prohibit short-term lending as predatory.
Expensive Payday loans repaid with the next paycheck are allowed in states where small loans are deregulated or traditional small loan or usury laws don’t cover payday loans.
Some states prohibit or restrict small dollar loans secured by your paycheck in order to protect borrowers from usurious payday lending.
Car Title Loan Laws
A car title loan is also a type of short term loan like Payday Loans. But Title Loans are secured by your vehicle’s title. That’s why they are less risky and typically cheaper. They are to be repaid within 30 days.
If you can’t repay the money you owe, the lender may repossess your car from you in order to sell it and keep the money. That’s why it’s better to find out Title Loan laws specific for your state before applying for one. The laws regulate the loan amounts, interest rates, repossession laws, and more.
No matter what loan type you choose for your emergency cash needs, always learn the laws before applying. Or even consult your state’s attorney to make sure you’ll borrow from a safe and legit lending company.