Payday Loans

Marketed as a way to help consumers pay the bills until their paychecks arrive, payday loans trap consumers in terrible cycles of debt, dragging their families more deeply into financial crisis. In return for a loan the consumer provides the lender a post-dated check for the amount borrowed plus a fee. The check is held for one to four weeks (usually until the customer’s payday) at which time the customer redeems the check by paying the face amount or allowing the check to be cashed. Payday lenders encourage their customers to get on a debt treadmill by refinancing one payday loan with another. The fees for payday loans are exorbitant with effective interest rates that can top 1,000 percent.

Policy Analysis

Letter: Regulatory Alert Letter to All State Bank and Other Regulators Regarding Payday Lending and Related New Scams, November 2005 (PDF 87KB)

Chart: Revised Chart of State Payday Loan Charts, November 2005 (PDF 94KB)

Summary: Updated Summaries of State Payday Loan Laws, November 2005 (PDF 233KB)

Model Deferred Deposit Loan Act: to protect consumers who enter into short-term, high rate loans from abuses that occur in the credit marketplace when such lenders are unregulated.  

Analysis: Deferred Deposit Loans