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