A recent article in the Washington Times pointed out some serious concerns for states which have forbidden or severely constrained traditional payday loans. These loans are an independent financial venture, and have boomed in the past five years as the recession as driven bank accounts lower and lower and the need for emergency cash higher and higher. Currently, almost 70 percent of Americans do not have a savings account to help in case of an emergency. Instead, they use a payday loan, a short term loan which can help post-date a paycheck, with interest, so that the borrower can have hundreds of dollars that he or she would receive later right now.
These small loans only last a few weeks, and are available to virtually anyone because payday lenders do not normally check credit. Instead, they carry high interest rates as insurance from irresponsible and procrastinating customers. A payday loan can stay relatively cheap until the borrower begins extending his or her loan and rolling the loan over. These bad decisions can cost hundreds, and eventually thousands of dollars beyond what the client expected to pay.
Some states have outlawed the practice of payday loans or cash advances out of concern for customers who were not able to repay their loan and struggled through a debt cycle. Unfortunately, when states eliminate this outlet, it means that the men and women with bad credit now have nowhere to turn. These people are not able to get a loan from a bank or credit union. Their options are now restricted to over-drafting or maxing out a credit card to pay for whatever financial obligation has come up. These states who have destroyed their payday loan business are finding that desperate Americans are turning to the only payday lenders who can provide them the money they want. These are the companies that are owned by American Indian tribes. The Cloak of Sovereign Immunity states that American Indians have special rights which eliminate them from certain prosecutions. Many of these tribes now run payday lending companies in the places where other lenders have been banned.
In Montana, for instance, the state government determined that all payday lenders must adhere to a 36 percent interest rate cap last year. This led to an 83 percent drop in payday lenders in the area. American Indian tribes, however, are exempt from the interest rate cap, so they are able to sell payday loans in the state and make major profits from interest rates in the 300 to 400 percent range. States are concerned because they have no control over these lenders. Legal battles have been fought in California, West Virginia, Missouri, New Mexico, and Maryland over this issue. As well, a court case is currently raging in Colorado.
When you apply for a payday loan, you must make sure that you are siding with a company you can trust. Strive to pick a company that is licensed in your state, and is accredited. If you can trust your lender, you will be granted a worry-free loan. Make sure to pay your loan back on time to avoid serious roll over fees. It is best to avoid tribal-run payday loan companies if possible, because they are able to get away with a lot of subversive activity that you want to avoid. Find a reputable company and get started today!
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