What is the Limit on Interest Rates for Payday Loans or Cash Advances in North Dakota?
Full Question:
Answer:
The federal Truth in Lending Act requires disclosure of the cost of credit. You must receive, in writing, the finance charge (a dollar amount) and the APR, which is the cost of credit on a yearly basis. Payday lenders are subject to this regulation.
Usury laws limit the interest rate amount a lender can charge. In Georgia, an unlicensed lender cannot charge more than eight percent interest on a loan of $3,000 or less. Some states, such as Delaware and South Dakota, do not have a usury limit; so if you were to borrow money from a lending institution in those states, there would be no cap. By claiming to be charging for the 'service' of cashing a paycheck, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs may be effectively bypassed.
The Industrial Loan Act of 1955 essentially made payday lending illegal, by requiring state licensing and registration and by imposing strict usury limits on small loans. In 2004, the Georgia General Assembly passed some new provisions to increase the fines and criminal penalties for people making small loans at illegal rates of interest. The law went into effect in May 2004, and though it is under review in the federal courts, it is currently in effect. Referred to as the Payday Lending Act of 2004, this law authorizes felony and racketeering charges against violators, as well as fines of up to $25,000 per violation and a possible jail sentence of 25 years.
The Governor's Office of Consumer Affairs does not handle complaints relating to payday lenders. If you are the victim of a payday lender, contact your county district attorney and notify the Office of the Commissioner of Insurance, Industrial Loan Division (404-656-2078).
If you believe that a lender has violated the Truth in Lending Act, file a complaint with the Federal Trade Commission (FTC). The FTC cannot solve individual problems but will be able to act if it discovers a pattern of violations.
For further discussion, please see:
http://www.suddenpayday.com/north-dakota-law.html
Please see the following ND statute on payday loans:
13-08-12. Fees for service — Deferred presentment
service transaction procedures — Penalty.
1. Before disbursing funds under a deferred presentment
service transaction, a licensee shall provide to the
customer a clear and conspicuous printed notice
indicating:
a. That a deferred presentment service transaction
is not intended to meet long-term financial needs.
b. That the customer should use a deferred
presentment service transaction only to meet
short-term cash needs.
c. That the customer will be required to pay
additional fees if the deferred presentment service
transaction is renewed rather than paid in full
when due. If the transaction is renewed, any amount
paid in excess of the fee applies to the payoff
amount.
d. A schedule of fees charged for deferred
presentment service.
e. Any information required under federal law.
f. No property, titles to any property, or
mortgages may be received or held directly or
indirectly by the licensee as a condition of a
deferred presentment service transaction or as a
method of collection on a defaulted deferred
presentment service transaction without proper
civil process.
2. A licensee may charge a fee for the deferred
presentment service, not to exceed twenty percent of
the amount paid to the customer by the licensee. This
fee may not be deemed interest for any purpose of law.
No other fee or charge may be charged for the deferred
presentment service, except that a fee, not to exceed
the cost to the licensee, may be charged for
registering a transaction on a data base administered
or authorized by the commissioner. No property,
titles to any property, or mortgages may be received or held
directly or indirectly by the licensee as a condition
of a deferred presentment service transaction or as a
method of collection on a defaulted deferred
presentment service transaction without proper civil
process.
3. A licensee may not disburse more than five hundred
dollars to the customer in a deferred presentment
service transaction.
4. A licensee may not engage in a deferred presentment
service transaction with a customer who has an
aggregate value of all outstanding obligations from
any one customer exceeding six hundred dollars which
is payable to the same or any other licensee. A
licensee may not enter a new deferred presentment
service transaction with a customer within three
business days of that customer's completion of a
previous deferred presentment service transaction. A
licensee may rely on a written or electronic
representation of a customer regarding the existence
of any outstanding obligations for deferred
presentment held by a licensee other than the licensee
receiving the representation until the data base
provided for under this subsection is in operation,
and after that time may not rely on a customer's
representation but must verify the fact using the data
base. However, if a licensee has multiple locations,
that licensee may not rely on the representation of a
customer regarding the existence of any outstanding
obligation for deferred presentment held by that
licensee, or one of the licensee's multiple locations,
unless the licensee and the licensee's multiple
locations use a point of sale registry or some other
accounting system to attempt to prevent violations of
this subsection. The commissioner shall administer or
authorize the development of a data base in which each
transaction must be recorded for the purpose of
preventing violations of this section. The
commissioner shall adopt rules governing the creation,
structure, and use of the data base.
5. Before a licensee may negotiate or present a check for
payment, the check must be endorsed with the actual
name under which the licensee is doing business.
6. Each deferred presentment service transaction,
including a renewal, must be documented by a written
agreement signed or similarly authenticated by the
customer. The agreement must contain the name of the
licensee; the transaction date; the amount of the
obligation; and a statement of the total amount of fees
charged, expressed as a dollar amount and as an annual
percentage rate. The agreement must authorize the
licensee to defer presentment or negotiation of the
check, or electronic debit of the customer's account,
until a specified date. The maker of a check may
redeem the check from the licensee at any time before
the negotiation or presentment of the check by making
payment to the licensee. A customer agreeing to an
electronic deferred presentment service transaction
may repay the obligation at any time before the
agreed-upon date. A customer may rescind any
transaction by the close of the business day following
the day on which the customer receives payment from
the licensee at no cost. If a customer agreeing to an
electronic deferred presentment service transaction
rescinds the transaction, the licensee must facilitate
the repayment of the funds through the same electronic
means the licensee used to deliver the funds to the
customer.
7. If a check or electronic debit is returned to the
licensee from a payer financial institution due to
insufficient funds, closed account, or a stop payment
order, the licensee has the right to all civil remedies
available to collect the obligation. The licensee may
contract for and collect a returned check or electronic
debit charge not to exceed twenty dollars. No other fee
or charge may be collected as a result of a returned
check or electronic debit or as a result of default by
the customer in timely payment to the licensee.
8. A customer who has authority to make a check or
authorize an electronic debit and enters a deferred
presentment service agreement is not subject to a
criminal penalty relating to the check, electronic
debit, or the deferred presentment service agreement
unless the customer's account was closed on the
original date of the transaction. At the time of
entering a transaction involving a written check, a
licensee shall verify that the account on which the
check is written is open. A licensee may not pursue or
threaten to pursue criminal penalties against a
customer for criminal penalties prohibited by this
subsection.
9. A licensee may not engage in unfair or deceptive acts,
practices, or advertising in the conduct of a deferred
presentment service business.
10. The amount paid to the customer by the licensee in
a deferred presentment service transaction must be
paid in the form of cash, check, or an electronic
credit to the customer's account.
11. Each licensee must conspicuously post in the
licensee's licensed location a notice of the fees
imposed for the deferred presentment service. A
licensee that engages in a deferred presentment
service transaction via the internet shall require its
customers to acknowledge the fees imposed using a
click-through or other method that prevents customers
from completing the transaction without reviewing the
licensee's fees.
12. A licensee may not renew a deferred presentment
service transaction more than once. A licensee's
renewal fee may not exceed twenty percent of the
amount being renewed. The renewal fee must be paid in
cash, money order, or cashier's check. The total
period of deferral, including the initial deferral and
one renewal, may not exceed sixty days. An individual
renewal period may not be less than fifteen days.
After sixty days the renewed deferred presentment
service transaction must be paid off in cash, money
order, electronic payment, or cashier's check by the
customer or, if a check is used, the check must be
deposited by the licensee.
13. A licensee may not renew, repay, refinance, or
consolidate a deferred presentment service transaction
with the proceeds of another deferred presentment
service transaction with that licensee by the same
maker or customer. It is presumed that a deferred
presentment service transaction initiated within three
business days before completion of a deferred
presentment service transaction is a violation of this
subsection.
14. A licensee may not conduct another business, other
than a bona fide pawnbroking business, within the same
office, suite, room, or place of business at which the
licensee engages in deferred presentment service
transactions unless the commissioner provides written
authorization after a determination the other business
is not contrary to the best interests of consumers.
15. A licensee shall provide a notice in a prominent
place on each deferred presentment service agreement
in no less than ten-point type in substantially the
following form:
State law prohibits this business from allowing
customers to have outstanding at any one time,
deferred presentment service transactions totaling
more than six hundred dollars.
16. A licensee or any agent of a licensee who
willfully violates this section is guilty of a class A
misdemeanor.
