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Payday loan industry is chock-a-block with fraudsters pretending to be genuine lenders. The fact is that more than 50% of these websites are just bogus operators who have NO CASH to lend. They have only one intention, STEAL cash from YOU! Most of these websites could be operating from abroad with fake US address, if at all they display any address!
In the US, as of July 2013, 12 states have made payday loans illegal and another 6 have highly restrictive laws capping interest at low levels which makes payday loan lending impossible.
Payday Loans are Illegal in the following 12 States & the District of Columbia:
Payday Loans are impossible due to restrictive conditions in 6 states
Annual interest is capped in 2 digits with other restrictive conditions set, making it impossible to give Payday loans legally, in the states of:
In the above 18 States, the Payday loan websites have no right to lend at the rates & conditions that they operate and hence no right to recover debt too, if at all anyone really lends! (Many of them are just scammers who collect advance fees and never lends)
Currently, Payday Loan is allowed in following 32 states with certain conditions and limitations.
If you plan to take a payday loan in any of these 32 states, should refer http://www.paydayloaninfo.org/state-information and verify the limits and conditions and take loan ONLY from companies (websites) which adhere to these conditions.
Important: Companies offering Payday loan have to be registered in respective states in which they lend.
For example, if a Payday Loan company is registered only in Alabama and you are in California, the company can not lend to you! For registration, companies have to have an address, bank accounts and they are subjected to inspections and mandatory filing requirements.
How do we check whether the Payday Loan company is registered and Authorized to lend in my State?
Visit the website of CFA (Consumer Federation of America) at http://www.paydayloaninfo.org/state-information. Select respective State. In the State's page, click on "Licensee Database" and search for the company by its name.
For example, select California and search for “Moneytree”. You will find that this company is registered to lend and all branches in California are listed with license numbers.
How do I avoid Payday Loan Scams?
Very simple! Check whether the lending company has a legitimate address and whether it is registered in the State to carry out business. Never engage with people offering quick loan on phone. They are fraudsters and 99% could be crooks from abroad. (You can easily judge them, by listening to their accent)
Do I have to payback the loan if the lender is illegal?
If an unregistered illegally operating lender has loaned you cash, pay off the Principal, Initial Fees and Interest to the extent allowed by the State. If the State has banned Payday Loan, pay off Initial Fees and the Principal amount.
Do note that an illegal lender will NOT be able to enforce the Loan Contract, legally. It will NOT go to police or court since they are operating illegally and will be afraid of being caught. It may call and make EMPTY threats of arrest, wage garnishment etc to scare you!
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