Loan Rules In Alabama and Arkansas
Payday loans (also referred to as payday advances, salary loans, payroll loans and cash advance loan) are small-dollar amount loans that are usually unsecured and short-termed They rely on the borrower’s previous record of employment as a sign that the loan will be paid back with interest at the loan due date.
Because payday loans are at a high-end risk to the lender, the interest rates are extremely high. For example, the interest on a $200 loan for 14 days could be as high as $30, an interest rate of 391% if looked at conservatively.
Pawn shops make short term loans similar to payday loans. The only difference is that the loan is secured by some form of personal property the pawn shop owner has deemed worth more than the face of the loan. If the loan is not paid back at the end of the normal 30 day loan period, the shop has the right to sell the pawned item and keep the proceeds.
The payday loan industry has suffered almost from inception from public charges of excessive fees, preying on the less fortunate in our society, outright fraud and cheating. The Federal Government gave up on the idea of overseeing national payday loan regulations long ago and put the regulatory power in the hands of the individual states.
As a result, regulations, loan terms, interest rates and the length of time of payday loans vary from state to state. Citizens in some states became so fed up with the rampant corruption in the industry that they voted to make payday loan offices illegal.
Arkansas was one of those states. By 2011, every payday loan office in the state had shuttered their doors and departed for greener pastures. Payday companies located outside of Arkansas quickly filled the void and continued to do business over the internet. Because these internet companies are not constrained by any regulations, wild stories of fraud and overcharging are mover prevalent than ever.
Alabama is one Southern state where brick-and-mortar payday loan offices are legal. The regulations for the payday loans are simple and easy to understand.
The maximum loan amount is $500 cumulative, meaning there is no limit on the number of loans you can have out at one time but the total of the loans cannot exceed $500.
The loan terms are a minimum of 10 days to a maximum of 31 days. The maximum finance rate is 17.5 percent. Borrow $100 on a payday loan and payback $135.00 on the 31st day. Any default carries an additional 3 percent/month charge. In real terms, the 17.5 percent rate figures out to a yearly APR rate of 456.25 percent.
Rollovers (extend the loan) are allowed only once per loan.
State regulations also allow, in some instances, cooling-off periods and extended payment plans.
On collection fees, a $30 NSF check fee can be added to the outstanding loan by the lender. As for court costs, attorney’s fees up to 15 percent of the face amount of the NSF check as also permitted.