Advance Loan Montana Payday
The payday loan industry has come forth in response to consumer demand for small loans for short periods of time that which is not normally made by traditional lenders. Borrowers who normally use these types of loans find themselves on the road to financial disaster because of the relatively high costs of obtaining the loans. Nationwide consumer groups have criticized payday lenders for annual percentage rates of 900% which exceeds the rates offered by traditional lenders.
Advance Loan Montana Payday
In Montana, a group of payday loan lenders concerned about defending their reputes and the rights of borrowers promoted passage of the Montana Deferred Deposit Loan Act that was effective from October 1, 1999.
This Act outlines the rights and responsibilities of borrowers and businesses that make deferred deposit loans. In Montana such loans are more commonly known as payday loans, cash advance loans, postdated check loans, or delayed deposit checks.
Finance charges and APRs vary from lender to lender. Borrowers who want the lowest finance charge on payday loans should compare APRs among lenders. A payday loan advertised at an APR of 391% is less costly than one quoted at an APR of 565%.
Who are payday lenders?
In Montana a payday lender is defined as a business that provides loans from $50 to $300 for up to 31 days. The Division of Banking and Financial Institutions which is within the Department of Administration are the authorities who issue annual licenses authorizing lenders to make payday loans. The Division conducts annual examinations to ensure that lenders are in compliance with the provisions of state law. In July 2002, there were 88 licensed payday lenders in Montana.
Methods of Payday Advance in Montana:
There are two alternative methods for making payday loans:-
- The first method, a payday lender loans money to the borrower and accepts a check for the loan amount plus fees. The check is dated on the day it is written and the lender holds the check for the agreed number of days before depositing it. The borrower has the option of buying back the check with cash before the lender deposits it.
- The second method, a payday lender loans money to the borrower and accepts a postdated check. The lender agrees to hold the check until the date written on it. The borrower still has the option of buying back the check with cash before the lender deposits it.
What is the cost of a payday loan?
The finance charges for a payday loan are expensive when compared to many other types of loans. No credit history or collateral is required for a person to receive a payday loan. Accordingly, a high fee is applied to protect the lender from default loans.
The Montana legislature set the fee ceiling. The fee cannot exceed 25% of the face value of the check written for the loan. The face value of the check includes the loan and finance charges. Federal law requires payday lenders to disclose the finance charges on the agreement form as a dollar amount and as an Annual Percentage Rate. It is a must according to the Federal law that a payday loan fee be expressed as an APR. The APR is influenced by the length of time over which the loan is required.
How much money may be borrowed?
The maximum payday loan in Montana cannot exceed $300 plus fees. The minimum payday loan is $50 plus fees. A payday loan cannot exceed 25% of the monthly take home pay of the borrower. A borrower cannot have more than two loans prominent at any one time with a single payday lender. The total of the two loans cannot exceed the limit.
Consequences for inability to repay the loan when it is due:
A lender can take civil action to have the loan collected. The civil court can charge the defendant for all court fees and attorney's fees. The court can also trim wages, place a lien on a home or other asset or use other means to have the loan and court fees paid.
Can the payday advance be extended?
No. In Montana, payday lenders are prohibited from renewing, repaying, refinancing, or consolidating a payday loan with the proceeds of another payday loan to the same borrower. The lender may however, without charge, extend the term of the loan beyond the due date.
In case the check used to pay the loan bounces?
If funds are insufficient upon deposit of the check, the lender can apply a maximum charge of $15. This charge can only be applied once, even if the same check is deposited and returned a number of times.
Conclusion:
Payday loans provide access to money for consumers who believe they do not have other borrowing options. Some borrowers turn to payday lenders only in emergency situations and do not use payday loans on a regular basis. Others, however, find they need extra money repeatedly.
Other Articles
