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(Hosting-NewsWire.com, September 14, 2012 ) San Francisco, CA - California financial regulators have joined the chorus of lawmakers and organizations criticising the online payday loan business.
According to the financial regulators in California, many of these instant approval payday loans lenders are operating without licenses. They evade consumer protection laws and regulations, especially if they are located outside of the USA. Even if they are in the USA, they are often not in the state where their customers live, and this geographical disparity may leave those customers with little or no recourse if problems arise.
The California Department of Corporations states that many online payday lenders fail to disclose the annual percentage rate (APR) on their sites or in their ads. The APR is a standard measurement of the true interest cost of a loan, and disclosing it is required by both federal and state law.
Those who take advantage of payday loans, whether through a website or a brick-and-mortar, lender, agree to repay the loan out of their next paycheck. If they cannot repay the loan in full at that time, they will often roll over the unpaid part of the first payday loan into a new loan. This rolling over often becomes a debt trap according to many consumer advocates.
California law limits a single payday loan to a maximum amount of $300.00 and the maximum interest rate is capped at 15%. If an individual borrows $200.00 for 2 weeks, they would owe $230.00 at the end of the loan period. On an annual basis, that would work out to an APR that is 13 times higher than the most expensive credit cards which usually charge APRs of 24% to 26%.
Online payday lenders require their customers to disclose personal information including bank account numbers and other banking information. Some lenders will deposit money in the accounts before the customers have even agreed to the loan and then will siphon money out of the accounts for repayment. Some consumers who’ve fallen victim to this practice have closed their bank accounts. Some aggressive payday lenders choose to sue those customers in small-claims court.
In 2012, the California Department of Corporations has sanctioned nine payday lenders. They recommend that if you end up facing one of these nine lenders in court that you take a copy of the enforcement order to court with you. Show the enforcement order copy to the judge; you may end up with the case against you being dismissed if the lender(s) have violated the terms of the order.
The department also warns consumers to make sure that the online lender they are using or thinking of using is licensed to do business in California. The license information can be located online or by calling the department at 866-ASK-CORP.
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Source: EmailWire.Com
Source: EmailWire.com
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