This is a proposed model Act for legislatures to consider to protect consumers
from predatory small loans, including payday loans. The purpose of the Act is
to protect consumers who enter into short-term, high rate loans from abuses
that occur in the credit marketplace when such lenders are unregulated. This
Act is to be construed as a consumer protection statute for all purposes. More...
Predatory Small Loans: A Form Of Loansharking
In recent years, the majority of mainstream lenders have left the small loan market, leaving a vacuum being filled by companies offering payday loans. These are extremely high interest loans that extend until the borrower's next pay check. Many institutions prefer not to write small loans because, while the return on a $5,000 loan is greater than if only $500 is borrowed, the originating and servicing costs are not significantly different. The national finance companies, which were initially founded to meet precisely this credit need, have moved out of this type of small lending. As a result, the availability of small-sum, short-term credit has been severely curtailed. More...
