When it comes to taking payday loans, information is power. If a consumer doesn’t fully understand the terms and condition of a credit card or any other type of loan, they can end up paying more interest and fees than they had bargained for.
The higher cost to the consumer prompted lawmakers to pass lending laws to help govern the interest rate charged by payday lenders. These laws are meant to help protect the consumer however; some states have recently banned payday loan programs. Therefore, closing any means of financing due to poor credit histories. While all might seem lost there are companies that offer unique programs and loans bad credit to help these consumers.
Truth in Lending Act
Thankfully, the Truth in Lending Act, also known as TILA was implemented in 1968 to prevent this. Truth in Lending Act falls under Consumer Credit Protection Act. It states that all lenders must disclose the terms of their loans in a standardized way so consumers can make an informed decision.
Another part of TILA deals with how consumers are billed for the services they use. This portion of the act protects consumers from unfair billing practices. However, it is also important to realize that TILA is implemented in a series of rules known as regulation Z. Regulation Z requires that credit card issuers should periodically disclose terms and conditions of their credit cards to consumers.
According to the TILA, the following points represent disclosures under which loan issuers must take into account
(a) They must provide a standardized set of terms and conditions under which fees are charged. The consumer must also be aware of the grace period. i.e. times when financial charges must not accrue.
(b) They should highlight all methods used to determine annual fees, late payment fees and over-the-limit fees.
(c) The issuer must state the annual percentage rate of the account in question.
(d) Lastly, they must issue a statement that represents a card holder’s rights to dispute fees that don’t make sense as well as the procedures which they must follow when disputing charges.
Alternatives to these short, high interest loans can be longer term loans that offer better interest rates. Several of these programs are designed to help people that have credit issues and one of the more prominent companies is ARCCT. They have a range of personal online installment loan programs as well as shorter term loans.
TILA has been amended several times as the need to safeguard consumer interest keeps rising. For instance, in the year 1970, it was amended to ban unsolicited credit cards. Subsequent amendments have been done to cover various types of loans, including those that relate to military lending.
Military Lending Act
For a long time, U.S military service men and women have not been sufficiently protected from predatory lending practices. As a result, many of them have fallen prey in the hands of companies that charge exorbitant fees on their credit card loans or other types of loans.
Thankfully, in 2015, the president announced that the country intended to protect its service men and women by enacting stricter laws and policies that would see military personnel receiving fair interest and fees on loans.
This rule is an extension of the Military Lending Act which covers payday loans, refund anticipation loans, vehicle title loans, deposit advance loans, unsecured credit, installment loans and other types of loans in general.
The act puts an APR limit of 36% on all loans given to U.S military personnel. It is also known as the Military Annual Percentage Rate that covers all interest and fees associated with loans.
The 36% cap also includes other financial product fees such as credit default insurance and other interest in general. The military lending act prohibits loan companies from asking military persons to submit legal notice requirements, mandatory arbitration or provide their payroll allotment as a key condition when acquiring loans.
It also prevents creditors from asking military persons to secure a loan using a post-dated check or on interest that is more than the stated 36% APR. Furthermore, creditors and military persons must not be involved in vehicle title loans except when the creditor is a bank, a savings association or a credit union.
The industry is supposed to fully comply with these regulations as at Oct. 1, 2015. From there hence forth, all active service men and women, together with their families will be protected from exorbitant fees and interest on loans.
However, it should be noted that the payday lending laws will not affect all credit products. For instance, military personnel may still access scholarships, grants and no-interest loans from military relief societies. What’s more, the MLA excludes residential mortgages or purchase-money loans designed to buy a car and so on.
In conclusion, these payday lending laws give consumers the right to report to the Consumer Financial Protection Bureau if they believe that they’ve been mistreated or given insufficient information concerning a particular financial product they obtained from a creditor. What’s more, there’s also the option of filing a complaint at the state attorney general’s office. So even though a layman may not understand all the ins and outs of TILA, they must certainly look for common red flags that indicate that their rights have been violated. Once they have identified this, they can take action accordingly.