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State Payday Loan Laws Made Simple

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Hello,

I've been working to try to get responses from every state to help explain payday loan laws. I've recruited some help! It's not finished yet, but will be soon.

I want to keep this stuff all in the same format. Call me a control freak, but I want them to look the same, be easy to read, etc. If you have information you would like to add, please PM me with it and I can add it, or just copy the formatting already done. I really want this to be easy to understand, easy to read, and help people make sense of the laws.




What a great idea! I like the idea of format- it keeps it simple and all in one place!This will be an easy way to refer people to what the laws mean in terms they can understand-and in one place!! Thanks..Karen :D

Sub: #1 posted on Wed, 09/12/2007 - 19:36

Bossy4455 Bossy4455
Moderators
(Posts: 5854 | Credits: 743.03)

Emails to and from PA Banking Dept

Hello,

I have a question about payday loans in Pennsylvania. Does the small loan rate cap of $9.50 per $100 per year discount or 24% per year apply to these loans? I took out a few on the internet and am trying to figure out how much I legally need to pay. For instance on a $200 loan would I be legally responsible for paying back only $248?

Thanks!

Response:

Dear Ms.:

The 9.5 discount and the 24 % simple interest refer to calculations that can be used by companies that are operating in Pennsylvania and are licensed under Pennsylvania????????s Consumer Discount Company Act. With a number of exceptions, a lender that is located inside of Pennsylvania and who does not have any special lending authority (i.e., a special license or charter) who is making smaller loans not secured by real estate can only charge interest at a rate of 6% simple.

A lender that does not have a physical presence in Pennsylvania but who has lending authority from some other state can generally charge the interest rate and finance charges allowed by that other state.

The Department may or may not be reviewing this policy and I would not count on this e-mail as an interpretive opinion before starting any lending or business operations.

James Keiser | Administrator Non-Depository Institutions

17 North Second Street, 13th Floor | Hbg PA 17101
Phone: 717.783.8242 | Fax: 717.787.8773
jkeiser(at)state.pa.us | www.banking.state.pa.us

What does this mean?

There are no storefronts in PA. They are illegal.

Internet lenders can lend legally to PA residents as long as they are licensed in another state. They would need to follow the laws of the state in which they are licensed.

Sub: #2 posted on Wed, 09/12/2007 - 19:37

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from the WY Banking Dept

From:
Sent: Tuesday, August 14, 2007 1:24 PM
To: Marlene Aitchison
Subject: Internet Payday Loan Question


Hello,

I'm trying to find out if an internet bases payday loan company with no physical presence in Wyoming needs to be licensed to lend by Wyoming. If they don't need to be licensed by Wyoming, would they still need to follow Wyoming's payday loan laws, or would they need to follow the laws of the state in which they are licensed?

Thanks!

Response:

Hi -

Wyoming statutes do not exempt internet-based payday loan companies with no physical presence in Wyoming from licensing; therefore, if the company lends to Wyoming consumers, a license is needed.

License application forms can be found on our Internet website (audit.state.wy.us/banking/uccc/ucccapplicationforms.htm)

Please let me know if you have additional questions.

Marlene


Marlene Aitchison
Projects Coordinator
Wyoming Division of Banking
[email]maitchison@wyaudit.state.wy .us[/email]
307.777.7792 direct line
307.777.3555 fax

What does this mean?

Loan terms must be for at least a month.

They can charge you 20% or $30, which ever is more.

Loans cannot be rolled over.

Internet companies must be licensed by WY in order to lend legally.

Sub: #3 posted on Wed, 09/12/2007 - 19:41

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from the NH Banking Dept:

Hello,

I was wondering if you could tell me if internet based payday loan businesses need to be licensed in NH to lend to NH consumers? Would they need to follow the laws of NH regarding rollovers and such, or would they need to follow the laws of the state they are licensed in?

Thanks!

Response:

From: Shepard, James
Sent: Tuesday, August 07, 2007 8:36 AM
To:
Subject: FW: Payday loan question

Yes. All small loan lending with consumers located in NH requires licensure. In addition, payday and title lenders must maintain an office in the state of NH which is accessible to consumers.

Reply:

From:
Sent: Tuesday, August 07, 2007 11:38 AM
To: Shepard, James
Subject: RE: Payday loan question

So if they must have an office in NH, does that mean that internet payday loan companies that don't have any physical location in NH are operating illegally?

Response:

From: Shepard, James
Sent: Tuesday, August 07, 2007 8:43 AM
To:
Subject: RE: Payday loan question

Your question presumes that what they are offering is a payday loan which is very tightly defined. However, the more salient question is are they licensed at all? We regularly take action against internet lenders who are not licensed in NH. You can check the list of licensed lenders at: nh.gov/banking/consumer.html Scroll down to "Licensee Listings" The penalty for not being licensed is an absolute bar to collecting any of the money leant.

James Shepard
Staff Attorney -- Banking Department

What does this mean?

They can charge any interest they want, but once you default they can only charge you 6% interest.

There are no rollovers.

Internet lenders must be licensed.

Sub: #4 posted on Wed, 09/12/2007 - 19:44

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Great idea! This stuff is so confusing, this would really help. You are awesome!

Sub: #5 posted on Wed, 09/12/2007 - 19:44

Punkteri Punkteri

(Posts: 202 | Credits: 34.59)

Email to and from TN Banking Dept

Hello,

I'm trying to make sense of the payday loan laws in Tennesse. How would I go about calculating the allowable interest?

Thanks!

Response

From: Steve Henley
Sent: Friday, March 02, 2007 1:08 PM
To:
Subject: Re: calculating pdl interest

Dear Ms , technically it is not an interest rate but service fee and this is how it works. The fee cannot exceed the lesser of 15% of the check amount or $30. So if you have a check amount for $100, the service fee would not exceed $15 (15% x 100). Keep in mind the fee is on the check amount, not cash amount. If the consumer requests $100 in cash, the check amount would be $117.65. The check amount of $117.65 x 15% equals $17.65, and cash is $100 ($117.65 - $17.65 = $100). If the customer asks ... "how much should I write the check for if I want $50?"

You can back into the check amount by taking $50 and dividing it by 85% or .85. In other words $50 divided by .85 = $58.82. You can verify by multiplying $58.82 x 15% = $8.82 service fee. $58.82 - $8.82 = $50.

Remember the service fee is limited to $30 on all checks exceeding $200.

I hope this helps but please let me know if you have other questions.

615-532-6993 Steve Henley

Reply:

Hello,

Can you tell me if internet based payday lenders with no physical location in TN need to be licensed by TN to lend legally? Or would they only need to be licensed by another state? And which state's laws would they need to follow?

Thanks!

Response:

From: Steve Henley
Sent: Monday, August 27, 2007 8:12 AM
To:
Subject: Re: Internet Payday loans

Dear Ms , our statute does not address internet activity, but to obtain a license from Tennessee the entity must first have a physical location in this state.

Please let me know if you have other questions.

615-532-6993 Steve Henley

What does this mean?

They can charge 15% of the face value of the check in fees.

Rollovers are not allowed.

Internet companies do not need to be licensed by TN. As long as they are licensed in another state they can lend legally. They must follow the laws of the state they are licensed in.

Sub: #6 posted on Wed, 09/12/2007 - 19:46

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from the MN Banking Dept:

From:
Sent: Monday, March 26, 2007 3:44 PM
To: Financial.Commerce(at)state.mn.us
Subject: Payday loan questions

Hello,

I have a question about internet payday loans. Do these need to be licensed in MN to be legal? Also, how do I calculate the legal amount of interest they can charge me according to MN laws? I see the laws state:

Maximum Finance Rate and Fees: $5.50: $0-$50; 10%+$5: $51-$100; 7% (min. $10) + $5: $101-$250; 6% (min. $17.50) + $5: $251-$350 (After default: 2.75% per month)
Finance Charge for 14-day $100 loan: $15
APR for 14-day $100 loan: 390%

So for a $300 loan how would I calculate the interest? And since no rollovers are allowed and the companies I have loans with have rolled them over countless times, would I be correct in saying that they are breaking the law? I've been told by several of them that they don't have to follow MN laws, even though they solicited me, because they are licensed in the state that they are located in. Is that correct?

I really appreciate any help or direction you could give me!

Thanks!

Response:

From: Terry Meyer
Sent: Tuesday, March 27, 2007 6:40 AM
To:
Subject: FW: Payday loan questions

First we don????????t license lenders that are domiciled in other states. Minnesota law does not have a long arm statute and allows residents to seek loans wherever they want. Solicitations via the internet or ads do not place the lender in Minnesota, only a physical location would [the exception being residential mortgage lenders].

The way to calculate the APR for a 14 day loan is either using a T-I calculator. A fast check using the example for a $100 14 day loan is;
$15 finance charge divided by the $100 loan [proceeds of the loan, or amount financed] = .15, or 15%
.15 divided by the number of days in the loan, or 14, gives you the daily rate of .0004109589
Multiply that number by 365 [days in the year] = 3.91071428415, or 391.07% APR

Does that help ???????? and in Minnesota rollovers or refinancing is not permitted. Name the MN lender and file a complaint.

Reply:

From:
Sent: Tuesday, March 27, 2007 8:45 AM
To: Terry Meyer
Subject: FW: Payday loan questions

Terry,

So to make sure I understand this, a payday loan company located in another state doesn't have to be licensed to lend to MN consumers. But do they have to follow MN laws about rollovers and interest? Or can they follow the laws of the state in which they are located in?

Thanks for you help!

Response:

From: Terry Meyer
Sent: Tuesday, March 27, 2007 6:58 AM
To:
Subject: RE: FW: Payday loan questions

It is similar to credit cards ???????? I would bet, assuming you are a MN resident, that none of your credit cards are from banks located in MN. The Supreme Court ruled in both 1978 that rates, and 1996 that fees could be imported for credit cards issued by out of state lenders to other states borrowers. Its agency law. The use of the laws of the state in which the lender is licensed is required.

Please explain your interest and the firm you represent.

Reply:

From:
Sent: Tuesday, March 27, 2007 9:04 AM
To: Terry Meyer
Subject: RE: FW: Payday loan questions

Terry,

I don't represent any firm. I was just trying to get some more information about the laws governing these kind of loans. The reason I was curious about the specific point of if state law governs out of state pdl's is because where I live, Oregon, they do have a law saying that out of state pdl's much be licensed in OR and follow the laws of OR. I was hoping the same thing applied to MN, because in that case all his pdl's were grossly overcharging him.

Thanks!

Response:

From: Terry Meyer [
Sent: Tuesday, March 27, 2007 7:30 AM
To:
Subject: RE: RE: FW: Payday loan questions

Good luck ???????? we recently received a complaint on a Payday loan from Malta. Since MN doesn????????t have a law like OR each state would have to be contacted for their payday loan law to determine if a violation occurred.

What does this mean?

There are very specific rates they can charge you depending on the amount loaned.

Rollovers are not allowed.

Internet companies can lend legally as long as they are licensed in another state. They must follow the laws of that state.

Sub: #7 posted on Wed, 09/12/2007 - 19:48

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from OR Banking Dept:

Hello,

Can you give me a summary of the new payday loan laws that went in to effect on July 1, 2007? And can you clarify if internet based companies must now be licensed by Oregon to lend to Oregon consumers?

Thanks

Response:

The following is a summary of changes made to consumer finance, payday, and title lending by
the 2006 Special Session and the 2007 Legislature. This letter provides information on some of
the most frequently asked questions on the new consumer finance lending laws that take effect
July 1, 2007.

* Limits interest rates on payday or title loans to 36% per annum.
* In addition to the interest, allows a payday or title lender to charge a one-time 10% loan
origination fee on a new loan ($10 per $100) up to a maximum of $30 (regardless of the
amount of the loan).
* Sets a minimum term of 31 days for both payday and title loans.
* Limits payday and title loans to two rollovers/renewals.
* Prohibits a lender from making a new payday or title loan to a consumer within 7 days on
either side of the date on which a payday or title loan expires.
* Allows a lender to charge only one fee for NSF and dishonored checks, regardless of the
number of checks written by the customer; the fee is limited to $20.
* Allows payday or title lenders to pass through to the borrower any NSF or dishonored
check fees an unaffiliated financial institution charges the lender.
* Includes ???????sale-leaseback??????? arrangements in the definition of title loans, thus prohibiting
such arrangements unless the lender-buyer is properly licensed.
* Prohibits lenders from charging any fees other than those that are specifically allowed in
the payday and title lending laws.
* Starting July 1, 2007, you are limited to charging a maximum 10% loan origination fee
(based on amount loaned and subject to a maximum of $30) and a maximum 36% per
annum interest rate on all new loans. You must calculate interest on a 365-day year.
(Lenders have the option of using a 366-day calculation for leap years.)
* On July 1, 2007, interest rates and fee limits become effective. You can collect the fee
(finance charge) that you stated in the agreement that the borrower signed before July 1,
2007. However, you must use the minimum 31-day term and the maximum 36% interest
on any renewal of a payday or title loan on or after July 1. You must also comply with the
$20 maximum NSF fee limit on any returned checks you deposit on or after July 1.

What do I do if I decide to change my business model to make short-term loans only
through the Internet, mail or telephone?

You must provide information to our office describing changes in your business model. If
you are making loans to Oregon residents, licensing and complying with the new laws are
still required.

What does it mean?

They can only charge you 10% origination fee, and 36% interest. The origination fee can only be charged at the start of the loan.

The loan can be rolled over twice.

There is a 7 day waiting period between loans.

Loan terms must be at least 31 days.

Internet lenders must be licensed by OR to lend legally.

Sub: #8 posted on Wed, 09/12/2007 - 20:11

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from the Dept of Banking:

From:
Sent: Wednesday, September 12, 2007 1:38 PM
To: Goodwin, Annie; O'Sullivan, Kelly
Subject: Payday Loan Question


Hello,

Do internet based payday lenders that don't have a physical location in MT need to be licensed by MT to lend legally? Or is it enough that they have a license in another state?

Thanks!

Response:

From: O'Sullivan, Kelly [mailto:kosullivan@mt.gov]
Sent: Wednesday, September 12, 2007 1:20 PM
To: ; Goodwin, Annie
Subject: RE: Payday Loan Question


Ms. ,

If the internet payday lenders are offering loans to Montana residents or engaging in business in this state, they must be licensed by this state. They may need to be licensed as a deferred deposit lender or consumer lender depending on the products they offer. They need to contact the Banking and Financial Institutions Division for licensure. See banking.mt.gov/

Let me know if you need any further information.

Sincerely,


Kelly O'Sullivan
Legal Counsel
Montana Banking and Financial Institutions Division
Telephone: (406) 841-2935
Fax: (406) 841-2930

What does this mean?

They can charge you 25% of the amount loaned in fees.

Rollovers are not allowed.

Internet companies must be licensed by MT to lend legally.

Sub: #9 posted on Thu, 09/13/2007 - 02:00

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

Emails to and from the banking dept:

To Whom It May Concern:

I have a question regarding internet payday lenders. I have visited the Department of Financial Institutions site and found some information. However, I am still a little confused.

I understand that storefront payday lenders are legal in the state of Kentucky and have printed out the laws applying to them. However, there is nothing regarding internet payday lenders.

I did a search on the site to see if some internet payday lenders were licensed in Kentucky. No results came up for any of them. If the case is that an internet payday lender is not licensed in the state of Kentucky, what then?

Internet payday lenders are claiming they do not have to comply with Kentucky state law. They claim they comply with the law in which they are located.

If they are not licensed in the state of Kentucky to fund loans, are they not in violation of some sort of law?

Any help in this matter would be greatly appreciated. At the very least, it might clear up my confusion.

Thank you so much for your attention in this.

Response:

Internet payday lending is illegal in Kentucky.

Chris Thompson
Compliance Branch Manager

Reply:

I have emailed before regarding internet payday lending and received the reply that internet payday lending is illegal in Kentucky. Thank you for that information.

I now have another question. If an agency is attempting to collect on an internet loan - which was illegally funded - does the collection agency need to be licensed in the state of Kentucky? Is this even a legal debt to collect on?

Thank you for any information you can give.

Response:

I am not sure who if anyone licenses collection agencies. This Office does not consider it a legal debt as the entity was not licensed to do business in Kentucky.

Chris Thompson
Compliance Branch Manager

Reply:

I have viewed our state pay day law and understand that a store front pay day loan company can collect one NSF fee if your check is returned by your financial institution.

However, I have a question. How many times can a pay day loan company run the check through to your financial institution?

I have a pay day loan company that I am working on setting up a repayment plan; however, they keep running the check through my financial institution every week.

I was under the assumption that pay day loan companies may run the check through only once; however, I could be misunderstanding.

Could you please clairfy for me how many times a store front pay day loan company can run your check through your financial institution? I would like to be sure this company is following the law.

Thank you in advance for any answers/advice.

Response:

There is nothing in the check casher statute that prohibits the number of times a pay day loan company can run the check through; however, it is my understanding that banking law on allows a bank to do it only twice.

Chris Thompson
Compliance Branch Manager

I've looked more into this, to see exactly why internet lending is "illegal" in KY

Ms. :

We have an Administrative Regulation in Kentucky 808 KAR 9:040 Limitation on electronic fund transfer from customers accounts that states: ???????In connection with a deferred deposit transaction, a license shall deposit or present for payment a customer????????s actual check to the customer????????s bank or other financial institution unless that check is redeemed or bought back by the customer.???????

This prevents Internet payday loans in Kentucky and any company that may be offering loans in Kentucky is doing so illegally. If you have any additional questions feel free to contact me.

Sincerely,

Rodney Gabbard

What does this mean?

A legal lender must hold a check from the customer.

Storefronts can charge you 15% of the face value of the check.

Rollovers are not allowed.

A big Thank You! to Cannr for providing this information! :D

Sub: #10 posted on Fri, 09/14/2007 - 21:05

goudah2424 goudah2424

(Posts: 7936 | Credits: 1224.91)

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