Pay Day loans are a twentieth century innovation. These loans have a peculiarity in that they have a direct connection to your monthly salary, hence the name pay day loan. Another innovation as we shall say is that these loans are almost without any strings i.e. they are free in a way as no guarantor, mortgage or collateral is involved. This by itself is a big boon. The financial world has accepted these loans and there is no dearth of people who will disburse such loans. However all good things may have a rider. Pay day loans also have a rider in the form of the loan being for small amounts and also its availability to only those Americans who have a regular source of income. So in case you are unemployed than you may be out of the ring to avail a payday loan. But in case you are a salaried man or woman and you need cash real bad, then a pay day loan may be the answer for you. A second rider exists in the form of high interest which you may have to pay to avail this type of loan. You can't get away from it as this is an unsecured loan and the financial world has accepted it as a supplement to the financer who gives a loan at a greater risk without collateral.
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Loans and all financial transactions do come under the purview of the law makers. Hence Pay day loans are also under the scanner and some regulatory laws have been framed. The United States is an association of states. Certain laws are under state jurisdiction and certain under federal control. As far as these short term loans are concerned they are state subject and no federal law exists to regulate them.
But there is one exception to this scenario and that concerns pay day loans for members of the United States armed forces. In their case Congress has framed laws regulating the APR that can be charged to a service man. US Congress by an act in October 2006 has capped pay day lending for military personnel to 36 %.
Pay day loans as we know are also available to persons with bad credit. This is like opening a Pandora's Box and earlier people with bad credit were charged interest rates of 600 or 800 percent. This is pure extortion. But now regulations are there that restrict these extortionist rates. Thus it is in your own interest to be aware of the rules and laws that regulate disbursal of these loans.
The states have also enacted laws that make it mandatory for the lender to disclose the APR he will charge as well as all rules and regulations regarding the loan. All this is supposed to be in simple language and there has to be transparency in all deals. Presently more than 30 states of the union have passed laws regulating such loans and advances. The information on these laws is available on the net and can be assessed easily.
However there is a hiatus in the laws of the states. Nearly 37 states have declared pay day lending as legal and laws are enacted to regulate these loans. However in a lot of states including Georgia, such loans are proscribed and illegal. However when not explicitly banned laws that prohibit payday lending are usually in the form of usury limits. In states that have not proscribed pay day loans, the interest rates are capped and the APR is controlled. This is a major regulatory practice.
The Truth in Lending Act enacted in the United States governs the disclosure of APR. So no lender can by pass it. However the law recognizes that as these loans are short-term unsecured loans, perforce the APR can be high. Payday loans are thus a costly proposition.
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