New payday loan laws go into effect
Borrowers who need a few hundred bucks quickly are more frequently relying on so-called "payday loans" at one of the many small loan companies across the area, but these loans can also be expensive.
Now, rules are in effect that should allow borrowers to have more information about what they are getting into.
On Southwest Military Drive in San Antonio, there are loan companies on just about every corner. People go to those places to borrow a few hundred to a few thousand dollars for everything from bills to car repairs to other purchases.
Joshua Jones said he took out a $600 loan years ago and paid it back in about two months. Jones said he is still getting harassing phone calls from another company mistakenly trying to collect the money.
He warns borrowers to stay away from these types of businesses. "I don't want people to go through the same stuff I went through," Jones said.
Jones said the harassment was on top of the high interest rates and fees. His advice? "Honestly, I wouldn't do it," Jones said. "Not at all. Would not even do it. I tell folks it's a scam."
Jones hopes two new laws that took effect at the beginning of the year will help protect people using payday loan services.
State Rep. Joe Farias of San Antonio helped pass those laws. "You take out a $300 note and you end up paying $860 back," Farias said. "That is uncalled for. That is as close as you can get to highway robbery."
One of the laws now in effect requires companies to clearly state interest rates and fees to customers. The other requires them to be licensed by the state.
The Better Business Bureau worked to get those bills passed. Spokeswoman Kristi Pena said her hope is that consumers will be better protected.
"This is very good," Pena said. "The problem that we're having is this interest rate goes up to 800%. And people don't understand that. It is just outrageous.
payday loan laws - News
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Payday loan rules take effect in Saskatchewan | LendingLeaves.com
The Saskatchewan government is touting its new rules for the payday loans industry, saying they will make the loans more transparent and potentially reduce costs for consumers.
The Payday Loans Act took effect on Jan. 1, said Roger Sobotkiewicz, director of the payday-loans division of the Saskatchewan Financial Services Commission. It is the first time the province has had legislation specific to the payday-loan industry.
“It’s part of a cross-Canada trend,” Sobotkiewicz said Tuesday. “Several other provinces have just put in similar legislation or are putting in similar legislation. I think the industry jumped onto the radar screen across Canada at the same time and all the provinces have sort of worked together to move legislation ahead.”
Alberta, B.C., Manitoba, Nova Scotia, and Ontario have rules in place governing the industry.
Payday loans are short-term advances that generally have to be paid back before the customer’s next paycheque and are usually accompanied by high interest rates and service fees. Some regulations previously applied to them under the Trust and Loans Corporation Act, but the new legislation is more direct and comprehensive.
One of the first changes borrowers are likely to notice is that lenders are now required to display “very large signs,” visible upon entering the premises, which list all of the fees for payday loans. That is to “allow borrowers to shop around,” Sobotkiewicz said.
Also noteworthy is a new cap on loan fees. They must not amount to more than 23 per cent of the principal borrowed; that is, $23 on every $100, Sobotkiewicz said. Under the old system, depending on which fees were taken into account, some lenders “definitely would have been over” the 23 per cent cap that is now in place, he said.
The new laws also set out that lenders and borrowers must enter into a written agreement, which must include certain items. For example, written disclosure, prominently indicating the loan is a high-cost one, must be provided prior to agreements being finalized, Sobotkiewicz said.
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