Cash Advance and the Law
Different States in the U.S. have different laws with regard to cash advance loans. The high interests charged have sent many borrowers to financial ruin. Many States regard these short term loans as usurious loans and declared them unlawful. Other states regulate the rates of interest and lending amounts by putting legal caps on the amounts and rates of interest.
In 35 States in the U.S. cash advances are legal. In 15 States and in the District of Columbia, there are caps on the rates of interest charged. In all other states, payday lending is disallowed. Many lenders get over this outlawing of cash advance payday loans by lending money from other states through banks that are chartered in states where short term loans are allowed. In some states caps are placed on the number of loans a borrower can borrow for short term purposes. Others impose a limit on the rate of interest charged on a short term loan. All states require lenders to have a license before they start lending money.
Federal laws apply to military cash advances. Senior officers in the armed forces are advocating disallowing short term cash advances to members of the armed forces. They believe that these loans cause hardship to lower rung officers and their families.
Cash advance payday loans are usually made to low income groups and lawmakers believe that they are exploited by lenders. These loans are given for financial emergencies at a high interest and lenders attempt to make a fortune out of a misfortune. The law attempts to protect the exploitation of low income borrowers.
