Do You Know in Which US States Payday Loans are Banned ?
Although payday loans are increasing popularity among consumers as they provide them quickest cash to meet emergency financial needs, there are still 12 states in which there are either some laws to ban them or have strict lending laws. For instance, New York is considered one of the toughest states on payday loan laws, and certain usury charges can carry a maximum sentence of 15 years.
Payday Loans Banned States and Rules:
Georgia(Became Illegal in May, 2004):
The Georgia Industrial Loan Act(GILA) regulated payday loan industry in 2004 and inhibited lenders from functioning short term loan services in the state. However, short term loans could be functioned in the State unless made by a Georgia licensed industrial loan lender or an out-of-state FDIC insured bank as long as its agent in Georgia does not receive most of the profits. Loans made by a Georgia industrial loan licensee are subject to the terms and limitations of the Georgia Industrial Loan Act. The Georgia Industrial Loan Act of 1955 made payday lending illegal by requiring state licensing and registration by imposing strict interest rate limits on instant cash loans. In 2004, the Georgia General Assembly increased the fines and criminal penalties for lenders practicing at illegal rates of interest. The law went into effect in May 2004, and survived challenges in federal court. Known as the Payday Lending Act, this law authorizes misdemeanor charges against violators, as well as fines of up to $5,000 per violation and a sentence of 1 year.
Arkansas(Became Illegal in Late 2008):
Anti-payment movement was headed by Arkansas against abusive payday lending making payday advance cash loans illegal to be operated here. Also, after the Check Casher Act was canceled in 2011, lenders stopped providing these kinds of loans to consumers.
Maryland(Became Illegal in July 2009):
The Maryland Consumer Debt Collection Act banned payday lending in the state in July, 2009.
Arizona(Became Illegal on July 1, 2010):
One of largest payday loan companies in Arizona was Advance America, with 47 loan centers and all of them were shut down on July 1, 2010 with the announcement of payday loans to be illegal in the State. The law that permitted payday loans in Arizona expired on June 30, 2010, and consumer loans including payday loans with annual percentage rates (APRs) over 36% became illegal on July 1, 2010.
North Carolina(Became Illegal in 2001):
Payday loans were banned in North Carolina in 2001 but Senate Bill 89 was filed on February 13, 2013 which is still working to bring back these loans into practice in the state. But as of now, this payday lending service is banned in NC.
Washington D.C. (Became Illegal in 2008):
Consumer Protection Amendment act was enforced in 2008 and came into effect on January 9, 2008, which banned payday loans in Washington. Although they are not specifically banned but payday lenders do not prefer to instant cash loan here due to strict interest rate caps.
Connecticut Payday Lending Rules Changed:
In 1949, a section of the banking laws of Connecticut, Chapter 37-5 states that extortionate interest rates above 12% are prohibited while offering short term loans. Alongside, section 36a-556 of the state laws regulated the payday lenders to protect the consumers.
Ceasing Lending Activities in Massachusetts Rules:
The payday lenders were asked to cease the lending activities in Massachusetts in August 2009 by the Division of Banks.
New Jersey Rules:
Consumer Lending and Licensed Lender Act of 1996 was updated in 2009 against unsure lending charges and interest rates.
New York Payday Lending Rules:
Payday loans are illegal in New York according to state laws 1976 capping interest rate at 16%. That’s why it is considered to be toughest state because a non-banker who charges more than 16% is tend to subject to civil prosecution. Moreover, charging over 25% could lead to a first-degree criminal usury charge which is a Class C felony carrying maximum sentence of 15 years.
Limitation in Pennsylvania on Consumer Loans:
Pennsylvania does not have one specific law against payday lending. However, the Consumer Discount Company Act has set limitations on consumer loans under $25,000.
Usury Charges Prohibited in Vermont:
1980 Statue, 9VSA- 41A, went to effect in 1980, prohibited usury charges. A new Law passed on May 18, 2012 in which unlicensed loan transactions were announced to be illegal in the state. If the lenders intentionally violate these rules, the borrowers do not have to repay their debts to them.
West Virginia Interest Rate Caps:
State codes limit interest rates in Virginia making payday lending unprofitable business in the state
The above stated regulations are actively functioning in the country but still there are few fraud lenders who practice this financial service illegally due to which many consumers get stuck in the debt trap. So, you must ask for lender’s license and loan agreement to understand the terms and conditions before finalizing the loan deal.
