What is the Legal Status of Payday Loans in Georgia?
A payday loan is a short-term loan that is generally repaid when a person receives the next paycheck. The loan is used to meet the shortfall in cash during the end of the month. This shortfall may arise due to unexpected emergency expenses such as HVAC or car repairs. The amount, that is usually less than $500 and contains interest charges and fees, is repaid on the date of the next payday.
Regulations regarding payday loans differ in the states. In this article, we will look at the payday loan regulations that are in place in the state of Georgia.
Georgia Payday Loan: A Close Look
Payday loans in the state of Georgia are explicitly prohibited. In fact, it is considered a violation of the racketeering laws, which is a federal law that relates to different conducts including business lending.
The Georgia Industrial Loan Act of 1955 made payday loan lending illegal and imposed restrictions on small loans lenders. In May 2004, the Georgia General Assembly had put forward the Payday Lending Law of 2004. This law that had survived challenges filed in the federal courts increased the penalties on loan providers that charged illegal interest rates. It has authorized misdemeanor charges against violators of the law and imposed fines of up to $5000 and a possible jail term.
Keep in mind that some payday loan lenders in Georgia illegally give loans to the residents. An individual resident of the state that is given a payday loan having a high rate of interest can pursue a criminal action. The action can be filed with the help of a local district solicitor or the attorney. Moreover, victims could also contact the Office of the Insurance, Industrial Loan Division to report the incident.
While the Georgia Attorney General’s Office does not take legal action against a particular payday loan lender, the Office can take action for the greater good of residents of the state of Georgia.
Rules Regarding Small Loans
The strict laws regarding the payday loans apply for non-banking institutions. The Industrial loan lenders can offer the small loan or cash advance to the residents of Georgia. The loans can be given to every individual that is licensed by the Federal Deposit Insurance Corporation (FDIC).
Small loan lenders that are licensed in the state of Georgia cannot charge more than 16 percent per year on a loan (10 percent per year discounted plus fees). Any charge of 60 percent or more is considered criminal usury. The loan limits apply for all loans that are given to borrowers who reside in the state of Georgia.
A final point to keep in mind is that the Federal Truth in Lending Act requires small loan lenders to fully disclose the cost of credit. Borrowers should be informed about the financing charge in writing. Moreover, they are also required to disclose the Annual Percentage Rate, APR, which is the cost of the loan on an annual basis.