The Practice of Payday Loans in America
Payday loans business is a fast growing business that is quickly taking root in America. There are many advertisements available today especially online that solicit individuals to take out the payday loans to quick cash with little to no checks on the borrower. The aggressive marketing coupled with the hard economic times seem to have given a lot of success to the payday loan companies. The companies are making huge turnovers and profits. According to a Dallas Morning News release, Advance America, U.S largest payday loans providers charged its borrowers interests of $676 million to loans of $4.2 billion. This is such a huge rate of return on the loans. Cash America, another large payday loans provider made incomes of $81 million which was a 132% growth in their income in a period of 4 years. It is really booming business for the payday loan companies. However, there are various state rules and regulations that keep being put in place that limit the operations of these payday loan providers some of these limitations are provided below.
States Where Payday Loans are Illegal
Some states have simply made it illegal for payday loan providers to operate within the state. These states include Arkansas, Arizona, Connecticut, Colorado, Georgia, Maryland, Maine, New Jersey, New Hampshire, North Carolina, New York, Pennsylvania, Vermont and West Virginia. Some states like Massachusetts have placed high regulations that make the payday loan business almost not feasible. The states will normally make the payday loans in Pennsylvania illegal mainly because of their high interest rates.
Usury Limits in Various States
For many of the other states, a usury law is placed in force to regulate and control the maximum Annual Price Rate (APR) that can be charged by any loan lender. The usury law usually cap the interest rates at between 30-50%. This drastically reduces the interests that the payday loan providers can make from the payday loans. The usury will also include any charges and fees that are to be levied on the loan. In other words, if a payday loan provider requires you to pay $10 for a $100 and fees of $3, the usury rate to apply is the whole amount of $13.
Rate Exportation
To get around the usury law that has curbed the business of payday loan companies in such states, companies have sort partnerships with banks and other financial operators in states that do not have such usury laws. The payday loan providers hence provide their loans from these states and thereby enabling them to charge the high interest rates as is their practice. Since a lender can give money to anyone irrespective of their state, they are not limited by the usury law. The main states where there is no usury law and where many payday loan companies operate from is payday loans in South Dakota and payday loans in Pennsylvania.
Online Platform for Lending
Once these payday loans in Pennsylvania and payday loans in South Dakota set up their business, they market their services online and applications are also done online. This avoid any physical location or correspondence with clients from this states with an usury law. Approvals are therefore made online and if an individual qualifies, money is wired into their account.
Payday loans business is a fast growing business that is quickly taking root in America. There are many advertisements available today especially online that solicit individuals to take out the payday loans to quick cash with little to no checks on the borrower. The aggressive marketing coupled with the hard economic times seem to have given a lot of success to the payday loan companies. The companies are making huge turnovers and profits. According to a Dallas Morning News release, Advance America, U.S largest payday loans providers charged its borrowers interests of $676 million to loans of $4.2 billion. This is such a huge rate of return on the loans. Cash America, another large payday loans provider made incomes of $81 million which was a 132% growth in their income in a period of 4 years. It is really booming business for the payday loan companies. However, there are various state rules and regulations that keep being put in place that limit the operations of these payday loan providers some of these limitations are provided below. States Where Payday Loans are Illegal
Some states have simply made it illegal for payday loan providers to operate within the state. These states include Arkansas, Arizona, Connecticut, Colorado, Georgia, Maryland, Maine, New Jersey, New Hampshire, North Carolina, New York, Pennsylvania, Vermont and West Virginia. Some states like Massachusetts have placed high regulations that make the payday loan business almost not feasible. The states will normally make the payday loans in Pennsylvania illegal mainly because of their high interest rates.
Usury Limits in Various States
For many of the other states, a usury law is placed in force to regulate and control the maximum Annual Price Rate (APR) that can be charged by any loan lender. The usury law usually cap the interest rates at between 30-50%. This drastically reduces the interests that the payday loan providers can make from the payday loans. The usury will also include any charges and fees that are to be levied on the loan. In other words, if a payday loan provider requires you to pay $10 for a $100 and fees of $3, the usury rate to apply is the whole amount of $13.
Rate Exportation
To get around the usury law that has curbed the business of payday loan companies in such states, companies have sort partnerships with banks and other financial operators in states that do not have such usury laws. The payday loan providers hence provide their loans from these states and thereby enabling them to charge the high interest rates as is their practice. Since a lender can give money to anyone irrespective of their state, they are not limited by the usury law. The main states where there is no usury law and where many payday loan companies operate from is payday loans in South Dakota and payday loans in Pennsylvania. Online Platform for Lending
Once these payday loans in Pennsylvania and payday loans in South Dakota set up their business, they market their services online and applications are also done online. This avoid any physical location or correspondence with clients from this states with an usury law. Approvals are therefore made online and if an individual qualifies, money is wired into their account.
