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PAYDAY LOANS : TREAD CAREFULLY AND BE WARY IN THE PATH OF LOAN AND FINANCE TO REAP THE BENEFITS

Payday loans or simply put loan to meet expenses till the next pay cheque arrives. Recently, some ugly cases with borrowers have brought the old discussion to the hot seat. How safe are these loans? This leads us back to old grandma's words the there are 3 segments of people you should neither be friends with nor be enemies to; police, lawyers and creditors!

And so true is this in the context of payday loans. You can trust and fall back upon them but can never have blind faith. Barely had thewonga.com incident (of the site writing wrongfully to borrowers posing as legal solicitors demanding money and threatening with dire consequences in case of default) calmed down that a federal judge was irked by the fraudulent practices and dubious ways of another big firm.

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In this recent case, a Kansas city-based payday loan firm was found to be resorting to malpractices to make huge bucks at the cost of the borrowers. Similar cases were reported by different consumer forums. In this case Jeanie Morris, a single mother thought to apply for a payday loan to meet out the photographer's bill in her daughter's wedding. She had given all her information to a referral site as part of filling of application. No payday loan company contacted her but a Kansas-based firm accessed her information and credited an amount into her account. Not just this, the firm kept on deducting interest amounts from her account till her account dried up. And then started the sequence of threatening calls to exact payment much to her chagrin and surprise!

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With such cases popping up their ugly heads, a strict decision to put a curb on the fraudulent and unlawful practices of payday loan companies was a must. The result was that at the behest of the Federal Trade Commission and the Consumer Financial Protection Bureau, a Federal judge recently ordered closure of 2 online payday firms at least temporarily. As per the recent data the annual loan volume of payday loans alone across the United States is 27 billion dollars. This is when out of 36 states, only 27 American states legally allow payday lending. Of course all states have different rules and legislations to regulate payday lending and to extend full protection to the borrowers.

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The road to payday loans, thus means walking on the edge of a sword. You need to tread carefully. One may refer to the consumer federation of America site. This site comes out handy for borrowers. Here is an extension board for connectivity to the U.S consumer laws relating to payday lenders. Another important precaution while asking for a payday loan is to carefully check the whereabouts of the referral sites so as to ensure confidentiality of personal information given to them. Also, if a form for payday borrowing has been filled by a borrower, he/ she should check his bank account statements regularly to detect any unwarranted deduction. And then finally, the borrower should go through all information and terms and conditions (regarding payday loans) of the lending firm. The firm should have appropriate disclosures about the state it operates from, the mode of getting payment, the manner of loan repayment with full terms and conditions, the fees and APRs, the provisions of extensions and roll over options, etc. It may be worth noting that in case of payday loans, different states of America have different caps on the loan amount, loan term, maximum chargeable APR, maximum chargeable fees in case of default in repayment, etc. E.g. in Alabama, the maximum fees and finance charges on a payday loan cannot exceed 17.5% of the loan amount. Whereas in Alaska, it is $ 5 plus upto 15% of the loan amount. Similarly, the term of the payday loan, the maximum amount that can be raised by such loan, etc will change in every state. Also, noteworthy is the fact that few states do not allow payday lending and borrowing at all. While there are few states where payday lending and borrowing happens in different other variant forms of lending. To sum up, borrowers can get safe deals in case of payday loans by exercising little caution and care. The Payday Loan Reform Act, 2009 makes provisions for the same; viz. No lender can make a loan to a consumer unless :- * consumer is provided with the copy of the agreement * clear description of loan terms is provided * name, address and phone number of the loan company are provided * a warning of the loan cost must be provided (in at least 14-point bold faced type) * credit counseling availability (in at least 14-point bold faced type) * no criminal prosecution or security interest for loan repayment And * interest free extended payment plans.