I have seen payday loans used by clients, on several occasions, all with disastrous results.
Connecticut has a usury law which limits the interest rate on money loans. Therefore, the loans are illegal in Connecticut.
Unfortunately, not all states have usury laws; therefore, there are the states where the payday lenders are located. In addition, with the internet, the payday lenders can be located outside of the United States.
The payday lenders provide a service, which should be illegal. The lender will provide a very short term loan (often under 30 days) for a low amount of money, normally no more than $1,500. The problem with the payday loans is the fees and interest rate- the effective interest rate (APR) can be over 600% a year. According to one web site, the cost of credit can average $25, per $100 borrowed. For a 30 day loan, you are paying 25% interest for a one month loan.
The situation gets worse if the borrower fails to pay back the payday loan, within the normal payment period, as additional charges apply.
There is simply no excuse to take out a payday loan. Consumers need to plan ahead, to avoid the need for payday loans. Consumers need to have at least one month’s savings in the bank, for emergencies.
It is time that the politicians act, to establish a national usury law, and interest rate cap on loans. Senator Bernie Sanders attempted to pass such a law. However there is little, if any, support for this legislation. Let’s send a letter to our Senators and Representatives to support Sander’s Bill.
Attorney Robert M. Singer
Law Offices of Robert M. Singer, LLC
2572 Whitney Avenue
Hamden, CT 06518
203-248-8278