Facts

• Payday loans are emergency or short-term cash loans. They are made contingent on an individual providing a personal check, which is to be deposited at some point in the future. The check must be in the amount of the loan and the applicable finance cost. In many cases, the check allows the lender entry into the borrower's bank account electronically to deposit and/or repay loans. Usually, the lender will hold the check pending the borrower's payday. The borrower may have two options: 1) either pay the finance charge and rollover the loan; or 2) pay the loan in full and other charges.
  
  

Disclosure

• The laws about payday loans require the lender to disclose specific information to the borrower at the time of offering the loan. Lenders are no longer permitted to cloak the loan agreement in complicated and confusing language and charge hidden fees. The loan agreement must be presented in clear straightforward language; furthermore, lenders are required by law to disclose the terms of their loans in bold writing and at the time loan offers are made to their customers. The loan agreement must be written in the language in which the loan transaction was carried out.
  
  

Loan Terms

• States that have laws about payday loans typically have limits on the size of the loans that are permitted, which can range from $100 to $1000. Typical terms that must be included in loan agreements are the maximum loan amount, the loan term or period, finance charge and the annual percentage rate (APR). The agreement should also include the amount the person is borrowing and the total amount of the payments to be made to the lender.
  
  

Debt Limits

• In many states, payday loan laws regulate the maximum number of loans a borrower can have at one time; other jurisdictions do not permit loan rollovers. Some states have enacted a "cooling- off period," which entitles the borrower to a break for a predetermine number of days after a specified number of consecutive loans. There are also laws in some states that require lenders to offer repayment plans after a certain number of consecutive loans. The payments are typically made in equal installments and the borrower does not incur any additional fees.
  
  

Military Members

• In 2006, the United States Congress enacted a regulatory law about payday loans that prohibited lenders from charging members of the armed forces more than 36 percent APR. In addition, it is illegal for lenders to electronically access the bank account of military personnel by personal check or any other method of electronic access. Also, lenders are prohibited from requiring borrowers' vehicle titles as collateral for making small loans.