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Illegality of payday loans in Maryland

According to the Maryland legislation payday lending business is banned in the State.

Under its definition a payday loan is unsecured short-term cash credit given in advance for a customer’s next paycheck. As a rule payday loans are borrowed for a fortnight period. They can act as great assistants when a borrower is unable to receive a credit in the bank. But payday loans are not the cheapest ones due to their financial charges and interest rates evaluated in US dollars. In some cases annual percentage rates for the loans make up a 3-digit sum, in other situations a rate can even reach 1,000%.

Payday loans can really help people facing with unexpected problems, because of their easy availability and fast speed. But borrowers with low or middle income can appear in a more difficult financial situation by taking these loans, as they can fail to pay high interest. That’s why Senate Joint Resolution 7, a new law regulating payday lending industry, was adopted in the State in 2002. The Resolution states that payday loans are illegal in Maryland and lending companies which want to continue providing their services to borrowers should meet the requirements of the new law. In this case a percentage rate for a loan shouldn’t exceed 33% a year, which makes up 2.75% per month. The lenders that won’t correspond to this criterion will be regarded as law violators.

The process of receiving payday loans is very easy. For instance, if a borrower wants to get $100 in order to pay for unexpected bills, he addresses to a lending company and borrow this money in exchange for post-dated paycheck. He signs a paycheck amounting $115 and a lender can cash it when a borrower has his next payday. Therefore, a financial fee for a loan equals $15. After calculating we can get that the annual interest rate makes up 390%. But this rate is illegal according to the State law. If it happens that a borrower isn’t able to pay back the loan on time, he asks for a rollover, which adds 15% to the initial fee. Such high fees are considered to be predatory in Maryland, and therefore they are eliminated. But not every Maryland citizen is familiar with the law. Such borrowers can continue to apply for the loans and get into debt cycle just because of being aware of neither their rights nor legislative acts.

The Commissioner of Financial Regulation is the main body responsible for working with lending businesses in the State. It doesn’t matter whether they are large financial corporations, banks, small lending firms or check-cashing companies. The Commissioner gives licenses and monitors the activities of all above stated companies. It also deals with customers’ complaints and cases of law breaking. If a lender threatens or accuse you of something, feel free to contact this office.

Lenders are also prohibited to collect debts from their customers. It is not legal to call a borrower and ask him to repay a loan. Lenders engaged in such practices are criminals and law violators. So if you feel that a lender is trying to deceive you, address to the Commissioner and it will eliminate the problem quickly.