Overview of Payday Loans in Connecticut
Payday loans are a solution for individuals who find themselves in a financial crunch between the pay periods. The small loan amounts allow individuals to meet emergency expenses that deplete money in their account. The process of obtaining a payday loan is amazingly simple and fast. Anyone can take out the loan by submitting basic information. The loan amount is deposited into the account of the individual in quick time.
Legal laws relating to payday loans are not the same in all states. Some of the states have put no limits on the loans, while others have outright prohibited the loans. Let’s find out what are the legal provisions relating to loans in the state of Connecticut.
Payday Loan: Legal Status in Connecticut
Connecticut is one of the few states in the US where payday loans are prohibited. Lenders are not allowed to give loans to individuals residing in the state. Small loan lenders are allowed to give loans to the individuals provided they don’t charge more than 30.03 percent APR or $17 per $100 for up to $600 loan, and $11 per $100 for up to $1,800. The loan limit on the small loan is specified in Conn. Gen. Stat. §§ 36a-563 et seq.
The small lenders can ask the borrowers to repay the loan through deferred checks. However, they are required to obtain a license from the state to deposit the checks. In order to obtain a license from the state, lenders are required to pay a fee of $250 and submit basic contact information. Once the application is made, the commissioner will determine whether the business conforms to legal requirements and if the services offered are of value to the consumers. In addition, the small loan lender is required to have at least $10,000 in liquid asset for every business located in the state.
Apart from the caps on rates and licensing requirements, the state of Connecticut has also a law in place regarding the fees. In general, the lender is allowed to charge about one-half of one percent of the net loan amount plus a handling fee of no more than five cents for loan amounts less than $50 and ten cents for an amount greater than $50. The information about the fee schedule must be posted at a visible place at each of the business location.
The main reason that Connecticut and other states have banned payday loans is to protect the interest of the consumers. They believe that the high-interest rates charged by payday loan lenders go more harm than good. The high rate of interest causes a financial strain on the individual and increases their financial difficulties instead of solving them.
Having said that, a payday loan is a valuable resource for individuals that live from paycheck to paycheck. The short term loan is easy to obtain and places minimum requirements on the individuals to qualify for the loan. Laws are constantly changing regarding payday loans. So, its advisable that you stay up-to-date regarding the regulations.