Payday lending is a common phenomenon and is very popular. There are state and federal laws to help borrowers understand the process and take the right decision. It should be noted here that payday loans are often denoted as debt traps as borrowers failing to pay back loans might get stuck in the cycle of borrowing.
Research has shown that mostly payday loans are re-borrowed more than one time. It is true that a payday loan is meant to cover unforeseen emergencies but often this process of borrower turns into an unaffordable cycle of high interest loans. Make sure to take out these loans only when there is an emergency and you are capable of repaying loans.
Legal status of payday loans in California-
The other name of payday loans in California is deferred deposit transactions. Payday lending is legal in California as per the state law. In California there is a limit up to which payday loans can be offered and that is $ 300 amount.
According to the state law, the borrower can keep the loan amount not longer than 31 days. In the similar fashion the maximum finance charge for every $ 100 and APR has been fixed by the authority. Moreover, extension of time or a payment plan to pay back the borrowed amount of loan is allowed. But additional fees may not be charged.
Loan rollovers will be provided and there will be no cooling-off periods between two consecutive loans. Moreover, the maximum number of outstanding loan that is permitted is only one.
A fee that should not exceed a particular amount can be charged in case of return of dishonored check. Criminal actions for all type of cases are not allowed. This means criminal prosecution against the customer cannot be done.
As per calculations a good number of payday lender storefronts offering payday loans were found despite strict regulations by the state. Exact details about California payday loans laws can be checked from this site https://paydayloaninfo.org/states/california .
The two documents namely The Civil Code and The Financial Code contain the regulations concerning payday loans in California in written format. All the companies interested to enter in lending business within the state of California need to have a license issued by the Department of Business Oversight. This is mandatory in order to be able to operate inside the state of California.
This measure will ensure licensing of valid lenders around the state. This also aims at safeguarding the rights of the consumers and to protect consumers from potentially fraudulent actions. It is important to have a legal contract between the lender and borrower which should include all the transactions happening between the former and the latter.
To acquire more knowledge about the legislation structure of California payday loans you can visit this link https://www.ncsl.org/research/financial-services-and-commerce/payday-lending-2020-legislation.aspx.
The loan agreement which the borrower needs to sign should disclose information like loan amount, repayment term, interest charges and other finance charges. The legal contract of the payday loan should be written in a language used at the time of negotiations between the borrower and the lender.
As per rule the lender should not check if the borrower will be able to pay back loans on time. But it is the responsibility of the borrower to evaluate his or her own financial standing ahead of sending out requests for payday loans. Also, it is important for the borrower to check if the lender is licensed or not before applying for loans.
It is possible for the borrower to file a complaint either through mail or by submitting the complaint form online. Borrowers are not allowed to take out one loan in order to pay back the existing one. Every time a loan is requested the borrower will have to go through a new process and sign a new agreement.
Requirement of a post dated check-
Since payday lending is allowed in California thus the lender would require the borrower to provide some kind of assurance. There comes the requirement of a post dated check. The borrower needs to write this check at the time of applying.
In the event of delay or non-payment of loans, the lender will cash the check and take out the money. It is not mandatory to contain the required balance in the check while writing it. But the amount should be made available before the time of repayment.