As of November 2009, 31 financial institutions in 26 states, including Texas, Louisiana and Illinois, have participated in a program aimed at offering short term loans to low-income individuals.

The program offers loans of up to $2500 to those with little or no credit, as an effort to steer them away from the more dangerous lands of payday loans.

So far the program has lent over $28 Million in short term loans. The loans that are offered to individuals carry better loan terms than a payday loan, which often charge fees and have a triple digit interest rate.

Not only does the program provide quick cash when it is needed, it also gives those individuals with lower credit scores to build their credit.

A typical bank will usually offer these FDIC loans at a 14% to 18% interest rate, much better than what payday lenders have to offer.

Surprisingly, the banks participating in the program have seen relatively low default rates.

Payday loans in Arizona may face further regulation as a reform approaches the ballot in November. Over a quarter of a million signatures of Arizona residents were collected by the Arizonans for Financial Reform in an effort to get the measure on the ballot. To be deemed valid, and qualify for the ballot, a minimum of 153,365 signatures must be collected.

Things are looking positive for those seeking to protect fellow consumers by reducing the expenses of a payday loan. The act also hopes to eliminate the burden of those that get caught in the payday loan trap, which can be a deadly cycle for any consumer.

Those behind the initiative seek to implement a series of consumer friendly restrictions on the payday loan industry. This includes lowering the fees on short term loans, and preventing loan extensions. The initiative also includes a provision to bypass a legislative hearing scheduled in 2010 that could terminate the industry in Arizona.

Those against the Act argue that it will lead to fewer payday loan stores in Arizona, which in turn means fewer jobs. Polls show, however, 80 percent of Arizona voters want reform in the payday loan industry. When it comes to payday lenders, reforming the industry versus eliminating the industry is clearly the better road.

Links:
ballotpedia.org
azcapitoltimes.com
ktar.com

State Governments have been fighting back against outrageous payday loan interest rates by capping interest rates on loans. This has been seen most recently in Ohio, as well as Arkansas, New Hampshire, Oregon and the District of Columbia. All have limits on the interest rate payday lenders can charge on payday loans.

This has been the case after Congress limited interest to 36 percent for payday and car title loans to military families last year.

The Federal Government stated, “payday lending threatens the quality of life of military families and combat readiness of servicemen and women”. This is why payday loan and car title companies are outlawed near military bases.

The interest cap rate of 28% is a big change from the original limit of 391%. The change will limit profits for lending companies and some may even stop lending all together.

Another interesting fact is that the law extends loan terms from 14 days to 31 days, mainly to help those who only receive income once a month (social security). This way the borrower who lives off a monthly income does not have to pay two or more loan extension fees.

Payday loan borrowers need to make sure that they do not borrow more than they can handle. If the loan amount taken out is too large, it won’t be able to be paid off come payday, therefore getting the borrower caught in the typical payday loan trap. The fact that the government is stepping in and limiting interest rates and protecting borrowers is a step in the right direction.

VIA

The Payday Loans Act of 2008 has just been passed in the province of Ontario.

What it means: More regulation of the payday loan industry in Ontario and better protection for consumers.

The Act requires:

1. That payday lenders be legally licensed


2. That Payday Loan Lenders include all charges borrowers are required to pay in the total cost of borrowing. This is good for borrowers so they are aware of all costs and no unknown fees will come about.


3. That Lenders allow borrowers to cancel payday loan agreements during a “cooling-off period”


4. That Payday Loan Companies contribute to a public education fund on payday lending.

What’s next: An advisory board is getting together to determine a cap on interest rates of payday loans. This set limit will be included as part of this law and all lenders will be required to comply with the new law.

Ontario is now the 6th Canadian Province to put in place legislative measures to regulate the payday loan industry.

VIA

New restrictions are in place for the payday loan industry. A bill in Ohio was recently passed that will put new limits on payday loans. The law, which is effective September 1, 2008, would limit the allowable annual interest rate on payday loans in Ohio to 28%. This is a pretty low rate if you are familiar with payday loans and their outrageous APRs.

Payday lending offices usually charge about $15 for every $100 borrowed on a two-week loan, which comes out to an annual interest rate of 391%. The bill also means a borrower is only allowed four payday loans per year, with a maximum loan amount of $500, much less than the current limit of $5000. Obviously this bill would put a nice dent in the payday loan industry in Ohio.

This bill may be overall good for Ohio citizens from a financial point of view. Yes, it may take away a credit option for those in need, but payday loans contribute to poor management of personal funds because people continue to take out new loans to pay off old loans and borrowers find themselves caught in the payday loan trap.