Short Term Loan Industry Current Situation Overview - Will the Laws Be More Lenient?

When a family or a household urgently needs a small amount of money for the emergency needs such as urgent hospitalization, car or large kitchen appliance repair, taking out a payday loan seems to be a very good solution. It is fast, easy to get and virtually unconditional. However, the evident payday industry drawbacks such as high interest rates and harsh collection practices made residents of multiple states protest against poverty, unfair lenders and repeated borrowing necessities that are caused by too low incomes. Therefore, multiple local regulations aiming to protect the customers were enacted in multiple US states.

Current Short-term Loans Situation in the USA

Due to the economic recession, employment in the USA was showing a drop. According to Statista, it attained its minimum in 2010 and started growing since then. Harsh situation with the unemployment forced numerous Americans to look for short-time loans to cover their monthly expenses.

That’s why waves of protests against poverty and debts have ravaged the nation. The students and consumer organizations demanded the local authorities issue and implement strict laws restricting the lenders’ activities, lowering the interest rates and raising the income. The peak of this movement was in 2012-2013 as the strikes took place in multiple states such as Texas, Ohio, Missouri, Arizona and Florida.

Thus, some payday loan industry restrictions were implemented in numerous states. First of all, short-time lenders are to comply with the federal regulations. According to the Military Lending Act, 36% APR (Annual Percentage Rate) cap is imposed, but it concerns only the certain types of loans.

Additionally, according to Wikipedia, payday industry is completely prohibited in 15 US states, including:

  • Alabama;
  • District of Columbia;
  • Georgia;
  • North Carolina;
  • Pennsylvania;
  • Vermont;
  • Vest Virginia.

Other restrictions concern basically the maximum loan amount, maximum and minimum terms and maximum interest rates (in 14 days and APR), the number of loans per borrower. The loan amount allowed by the local regulations differ from $50 to $1,000, so the customers may get better short-term lending conditions nowadays, quite naturally, if the lenders continue operating in the state.

Payday Loan Industry Horizons

Where the short-time lending industry is legal, this activity remains the lucrative business. Multiple loopholes against the state laws exist, offering great opportunities to lenders. Thus, the borrowers’ strikes continue extending and the bills aiming to protect the customers are considered by local Committees, for example, in Missouri, in April 2018.

However, regardless of the fact that 14,000 jobs were lost from 2011 to 2016 due to legal regulation, the industry is still prosperous. According to the Bureau of Labor Statistics, 316,600 loan officers were employed in 2016. The average salary in the industry as of 2017 made $64,660 per year.

Meanwhile, the customers should not be completely sure that they are protected against unfair lending practices. Commonly, borrowers are often unaware of all the consequences of a deal when they apply. When money are required urgently, customers are attracted by fast and easy loan getting opportunity. So, remember that the debt is to be paid back very soon, estimate the APR and read the agreement conditions very carefully.

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