Practices Followed In Different States On Pay Day Loans
Though in most of the States in United States of America usury laws are in place preventing high interest rates on pay day loans, yet lenders find out ways and means to by pass the laws. Normally they build up a relationship with banks in other states where there is no such prohibitive laws. The practice is known as “Rate Exportation”. Since the loan is regulated under the laws of the state where the bank is located, the capping imposed by the other states is not applicable for the cash advance loans channeled through such banks.
However when the authorities became aware of these practices, they started prohibiting such unholy partnerships between banks and the lenders. They have not prohibited low fee payday loan altogether but has put in place a number of regulatory measures to prevent high rate of interest on such loans. Further, regulations were issued prohibiting recurring renewal of loans. Now y ou cannot renew your loans beyond the sixth time.
Some of the states have made laws by imposing a limitation on the number of normal or instant payday loan on an annual basis. After a fixed number of renewals, the lender has to go for a lower interest rate for the loan provided. States are gradually clamping down shutters on the practice. North Carolina stopped the practice of pay day loans since March. 2006 and Georgia banned the system since 2004.