Payday Loan Laws

The regulations governing fast cash loans are very stringent. In April of 2008, Congress proposed a new bill that could impact payday loans, and we'll tell you how here.

Regulating Fast Cash Loans

Ever since the payday lending industry took off in the nineties, the government has tried to keep interest rates and lenders under strict control with various regulations. Some payday lenders try to take advantage of people who are usually already in a vulnerable position financially with exorbitant interest rates or other questionable practices. Congress has tried to enact legislation that protects consumers not only from these predatory lenders, but also from themselves. Fast cash loans are so easy to get that some consumers can fall into a vicious cycle of debt that leaves them with more financial problems than they had to begin with. The most recent piece of legislation was proposed on April 11, 2008, and we'll tell you more about it in what follows.

New Regulations

One proposal recommended that fast cash loans not exceed more than 25% of the borrower's income. This would mean a lot more regulation for the payday loan industry, and it would reduce the amount of the average payday loan considerably. On the other hand, the same committee that came up with this regulation on quick cash loans also made it possible for consumers to borrow twice the amount they used to with payday loans.

How It Affects You

The intent of this proposed legislation was to limit the predatory practices of many fast cash lenders that take advantage of financially vulnerable borrowers. Ultimately, the bill did not pass. However, more and more states are trying to reduce or eliminate payday lending because they feel it leaves borrowers worse off than they were to begin with. Had this bill passed, it would've had a major impact on the payday loan industry.

So how is this proposed legislation relevant to you and your need for fast cash? For one, it signals you to be careful when you get cash fast through a payday loan. Not all lenders are trustworthy, and you should pay special attention to the interest rates you're being charged. Also be aware of exactly how much you can afford to borrow without having to struggle to pay it back. When you over-borrow, you risk falling into the debt trap that this legislation was trying to help consumers avoid. Of course, you can still get payday loans for the maximum amounts if you qualify, but you should think twice before doing so.