There are many people who have been having financial instability nowadays. The price of the commodities has been increasing. Most of the time, the salary earned is not enough to cover for these expenses. With the use of payday loans or cash advance, people who need instant money will be aided financially. A payday loan is a short-term loan that involves high interest rates.
Though these loan companies may charge high interest rates, the money needed can be instantly obtained upon the approval of the application. The payday loan companies can lend an amount of money by asking the borrower to write on a check. Then, when the payment term is up, the lending company will cash out the check that the borrower provided. This is how the companies in lending industry get their money back.
In the state of Tennessee, payday loan services are legal. This is based on Tenn. Code Ann. 45-17-101 et seq. The state is very strict in the regulation and implementation of laws regarding payday loans. They have clear detailed sections of their state government laws which have many provisions for the lender and the borrower.
For the lending company, they are required by the state to apply for a license of operation. The license is provided by the Department of Financial Institutions. In order for a lending company to be licensed, qualifications must be met such as having a net worth of $25,000 and providing records of people who own 5% or more of the company. If the lending company has more than one branch, each branch is subjected to a license fee of $500.
According to the laws of Tennessee, a maximum amount of $500 can be borrowed. Also, a loan can be made by the borrower up to three times as long as the amount borrowed does not exceed $500. The finance rate that the lending company can charge is only up to 15% of the face value of the check. As for the 14-day $100 loan, a borrower is required to pay $17.65 for every $100 loaned or a check fee for $15. Consequently, the Annual Percentage Rate or APR is 459% for a 14-day $100 loan. The loan made by the borrower should be paid within 31 days.
In Tennessee, laws regarding the defaults of the loans are clear and concise. When the lending company is not able to clear or cash out the check given by the borrower, they are permitted by the state government to charge for late payment. Their charge amounts to $17.65 for every $100 borrowed or $15 per returned check.
In addition to this, rollover is not allowed for the borrowers who still have debt to the lending company. When this happens, a new loan is issued. This new loan will include the unpaid debt plus the late fees. The state government is also very strict about prohibiting additional interest rates associated with the late fees.
The state government also has laws for prosecuting an individual who used checks that are not legit. If the court proves that a borrower issued an invalid check to the lending company, felony or misdemeanor may be charged. This does not only involve getting sued in court, the lender can also charge the borrower for the returned checks.
On the other hand, for the lending companies that do not follow the regulations, their license could be revoked or suspended by the state government. Aside from that, they will be required to pay $1000 for every violation committed.