A bill passed in November 2010 limits payday loans in Montana to a 36% interest rate cap. Montana voters and consumers made their voices heard to lower interest rates for the payday loan industry in their state. You can be just as effective when it comes to paycheck advance reforms in your state by speaking up and making your voice heard.
In states where payday lending is completely unregulated, annual percentage rates can reach into the thousand per cents. Some kind of regulation is necessary to curb lenders who just want to take advantage of their customers. Not all payday lenders charge such high interest rates. In states like Colorado, some payday lenders refund the initial service fee for customers who pay back their loans early. Other lenders charge only as much interest as they need to mitigate their lending risk. However, loan sharks can thrive in states where little or no regulations exist. That’s why states like Montana make drastic efforts to lower interest rates on their payday loans. Consumers voiced their desire for lower interest rate caps and voted for fair rates.
Of course, there’s always the question of lenders being able to stay in business after strict regulations are imposed. Many lenders in states with interest rate caps as low as Montana’s have ended up closing their doors for good due to the risk these kinds of loans carry. Without being allowed to charge an interest rate to pay off the risk, many lenders can’t stay in operation, which is sad news for the consumers who depend on them for emergency cash.
Which extreme does your state take? Familiarize yourself with the payday loan laws in your state and voice your opinion on what you’d like to see changed, just like voters in Montana did.