Many people are currently struggling with their finances. This is due to the pile of bills that are needed to be paid. In rough times like this, many run to the payday loan companies where instant money can be borrowed. Payday loans are small-amount loans that are designed to be paid in a short span of time. This type of loan charges high interests. Though this is the case, still many people go the payday lending companies to get help.
The payday loan works by asking the borrower to sign a check with a specific amount. When the payment period is up, the lending company will cash out the check once the borrower is ready to pay. In this type of loan, the check serves as collateral that is scheduled to be paid when the borrower’s next pay check is available.
In Texas, the laws they implement for payday loans are based on Tex. Fin Code 342.251 et seq., 7 Tex. Admin. Code 83.604, 4, and 342.601 et seq. According to their state government laws, payday loans are legal. Their administrative code indicates that the lending companies should display the finance charges and fees at their office where potential borrowers can see them.
Initially, the lending company should check and evaluate if the borrower has the ability to pay the loan. So, when an individual intends to pursue the loan, an agreement must be signed by the lender and the borrower. The agreement must state details such as the due dates, amount borrowed, and finance charges. This is to make sure that the borrower understands the terms and conditions set by the lending company.
There is no specified maximum amount of loan in the state. All borrowers should be able to pay the amount in a span of 7 to 31 days. For the maximum finance rate and fees that can be charged by the lender, it should not exceed the percentage stated in Tex. Fin. Code 342.251-342.259 and 7 Tex. Admin Code 83.604.
These sections of the state government law indicate that for the 30-day $350 to $569 loans, a maximum APR of 83.43% can be charged. As for the 7-day $100 loan, the maximum APR is 92%. Also, the considered acceptable Annual Percentage Rate (APR) for a 14-day $100 loan is 309.47%. This means that for every 14-day $100 loan should be paid with $11.87 by the borrower.
The Texas law does not specify many aspects in the laws affecting payday loans. This would include the number of maximum loans that can be made at a specific time. Also, there is no rollover allowed in their state but renewal charge can be added by the lender. When loan renewal occurs rather than full payment by the borrower, additional fees will be charged. If the borrower is still unable to pay the lending company, they have the right to sue the borrower.
Actually, there is also a special provision in their state government law. This involves S.B. 1479 which protects the military borrowers and their families in Texas against some actions that can be made by the payday loan companies.