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Strict penalties for offering payday loans in Georgia

A payday loan is a kind of a credit that is given to a customer till his next payday. High interest rates are usually applied to payday loans. That is why Customer’s Union considers them to be undesirable for a borrower’s budget. Using payday loans too often may lead to the endless indebtedness of a person and his possible default.

This is the main reason why payday lending business is illegal in Georgia. Furthermore, since there are still some ways by which lenders can operate, new limitations on the lending industry have been passed lately. There are new articles in the Code of Georgia at present, Chapter 17 under the name Payday Lending and Title 16 called Offences and Crimes. These new regulations consider all the issues relating to payday loans and determine civil and criminal punishments that can be imposed to violators.

Under the 16-17-2 of the State Code payday loans are given a new name now – small loans. The sum of such loan shouldn’t be below $3,000. For some lending companies and institutions it is legal to offer these loans to the Georgia customers, but only if their operations correspond to the Credit Card Banking Act’s provisions. Additionally, these companies should possess mortgage statues of the State. If not, the firms are to have a status of a bank, licensed institution or federally privileged credit union. Although these requirements are really strict, all lending companies are not allowed to establish annual percentage rate that exceeds 16% for a loan. It is clearly specified in Chapter 7-4-2.

On the other hand, Chapter 16-17-1 of the Code doesn’t prohibit applying for lending services in other States. Every citizen of Georgia has a right to receive a desired loan in a State where such loans are not eliminated. Auto title loans, pawnshop loans, installment loans are available for Georgia borrowers countrywide. However, some borrower’s property is to be pledged by him in order to receive a loan. Loans that require collateral can’t be put into the same category with payday loans. Generally the loan’s sum is the same and even less in comparison with tax refund which a customer may get.

In case a payday lender will conclude an illegal bargain with a resident of Georgia, the State Attorney General or any local attorney have a privilege to punish him. The 16-17-4(a) provides this rule. The threefold fine of the charged interest rate will be imposed to the lender. One half of this amount is to be given to the Georgia state budget and the attorney will receive the other half. In addition, payday loans that are provided to customers unlawfully will be imposed to another 50% rate fine. Furthermore, under 16-17-7 Section any interstate payday lending firm that is noticed by operating in Georgia will be deprived of its license immediately.

Finally, the 16-17-2 of the Code states that a local attorney and Attorney General are allowed to criminally prosecute a payday lender that is offering loans in the State. This lender will be not only penalized by a fine (which often reaches $5,000), but also can be imprisoned for a term up to one year. In accordance with the Georgia legislation one payday lending operation is one offence. If lender violated a law more than once, he will be put into jail for five years and will have to pay a $10,000 fine. So it is better not to deal with Georgia residents when providing payday lending services.