Peculiarities of ayday lending business in Iowa

It is rather common that people can find themselves in a tough financial state and need money as quickly as possible in order to solve their problems. A great amount of US families are living only on their paychecks and can’t protect themselves from unexpected emergencies, when urgent cash is needed and there are no places to borrow it.

A payday loan is a short-term credit which is given for a specified term at a high percentage rate to every customer who asks for it. Every American State has special legislative acts regulating payday lending operations and these acts differ from State to State. However, all of them have the same purpose, taking care of the State residents and securing them against unfair payday lenders. Under the 2 Iowa Code Ann. § 533D et seq. payday loans are legitimate in the State of Iowa.

Practically every citizen of the State can apply for this short-term loan. There are some requirements for the applicants, including consistent source of income and check account. A potential borrower should be 18 years and older and have a valid ID. As it was mentioned above, a check account is required. A candidate is to have a permanent employment. Sometimes other evidence of income, like social security card, is required.

In accordance with the State law, a payday lender is allowed to provide $500 or lower loans to a customer. A loan is to be paid off within a period of 31 days. Financial fees not exceeding $15 should be charged for a loan which is less than $100. Additional $10 can be charged for every further loan amounting $100. As a result, 433% is a standard annual percentage rate for a $100 payday loan offered for 2 weeks.

A borrower is required to take maximum two payday loans at a time. Moreover, any extensions of the loan are prohibited and a customer should entirely repay the loan till the due time. A fee for either insufficient funds or returned check makes up $15. There are no provisions concerning criminal suits against borrowers who default on their payments in the Iowa legislation now. The only thing stated in the law is that a lender is forbidden to threaten with criminal actions to his customer in any case.

In contrast, the law provides the following rules relating to the loan agreement. Any lending contract should be concluded in both the English and Spanish languages and should contain all the data about a loan’s sum, terms of payment, amount of financial charges, etc. An agreement is to be understandable to a borrower and provide lender’s contact information, including a free phone number in case a borrower has questions or problems. Only if all these requirements are met, a payday lending transaction can be considered legal. A borrower, in turn, should reveal his contact details to a payday lender.


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