California Payday Loans Reviewed
Payday loans, also called "cash advance loans" or "fast cash loans," are short - term loans in which the borrower writes a post - dated check to the lender in exchange for a loan. For example, a borrower may write a post - dated check for $200, pay a $30 fee, and then receives a $170 cash loan. The lender agrees to not cash the check until the borrower's following payday, up to 31 days.
While payday loans are known for their high interest rates and fees, the fact is that they do serve a very important purpose for those people who find themselves in a financial bind and need a quick infusion of cash to get them to their next payday.
California Payday Loan Laws
In California, millions of people take out payday loans every year. For example, in 2010 about 1.6 million Californians took out payday loans totaling $3.12 billion from more than 2,100 lenders. Each borrower took out an average of 7.5 loans for an average loan period of 17 days.
Fortunately, there are laws and regulations in place that govern fast cash California loan lenders. These laws are designed to protect consumers and to prevent predatory practices from lenders.
Some of the most important points of California payday loan law are as follows:
- The maximum loan amount for a payday loan in California is $300. Consumers cannot take out payday loans for any more than this amount.
- The maximum fee a lender can charge is 15% of the amount written on the check. In other words, if the borrower provides a post - dated check for $300, the lender can only charge up to $45 in fees.
- For a two - week payday loan, a fee of 15% is equivalent to an annual percentage rate (APR) of 459%. That is why these fast cash loans, while useful, should only be used in true financial emergencies.
- There may be other fee restrictions that apply for military service members. As a result, some payday lenders may opt to not grant loan requests to military members.
- If you request an extension on your loan and it is granted, the lender cannot charge you additional fees. However, lenders are not legally required to grant you an extension.
- A payday lender may not make you a new loan until you have paid off your other loan with them. Therefore, you cannot take out a payday loan to pay off an existing loan.
- Payday lenders are only allowed to charge one bounced check fee of up to $15. However, your bank may charge additional fees for your bounced check.
- Payday lenders may not threaten to prosecute you in criminal court for insufficient funds.
- Payday lenders are legally required to visibly post their California lender license and a fee schedule at every location.
- California law dictates that the contract for your fast cash loan must be provided to you in the language you primarily used to negotiate with the payday lender.
Be Smart about Payday Loans
California fast cash loans do serve a useful purpose for many people, and if you're smart about how you use them, they can be helpful in certain situations. However, it is important that you are careful about when you decide to take out a payday loan and whom you decide to get your loan from.
Recently, the California Department of Corporations issued an alert warning that some payday lenders operating online have failed to include APR rates in their ads as required by both federal and state law. Additionally, you will be disclosing personal data to the lender, such as your bank account information. Therefore, it's very important to make sure you only take out these loans from reputable lenders who are in full compliance with all California and federal payday loan laws.