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Illegitimacy of payday loans in New Jersey

A payday loan is a credit which amounts a small sum of money, is given in advance for a short term and charged with a financial fee and interest rate. Payday lending industry is eliminated by the legislation of New Jersey. However, the State citizens still have some possibilities to receive a payday loans from the firms that continue to provide lending services.

In accordance with Cash checking law of New Jersey, a lender is forbidden to accept a paycheck form a borrower who doesn’t have a bank account. That’s why the majority of payday lenders are not allowed to work in New Jersey. They can’t cash paychecks without an account in the bank.

Furthermore, the State legislators set rather strict limits on interest rates. Lenders of New Jersey are forbidden to charge their customers with the interest making up more than 30% per year. Such rate is very low in comparison with annual percentage rates in other States which generally reach 3-digit numbers. But the law is aimed at securing the State borrowers against predatory lending practices. Any lender that establishes higher rates is considered a law violator. It is another reason why payday lenders are unable to operate in New Jersey legally.

However, it is possible to find a lender who is able to give such loans. A number of companies offer short-term credit and charge financial fees rather an interest rate for it. In this case the activities of lending firms are not prohibited. The companies that provide their services via the internet are considered to operate in accordance with the law as well.

The lending institutions working in New Jersey and charging fees but not percentage rates are required to correspond to the following limitations. The loan amount shouldn’t exceed $2,500. A borrower who defaulted on his loan within a period of one year for three times is forbidden to take another loan. A lending company should keep records of all lending contracts for 5 years at least. Additionally, there must be a company’s name and its contact information, clearly understandable to a customer, on the check which a company writes out for a borrower.