Most people need quick loans to cover emergencies such as rent and medical bills. But cash advances can also turn out to bite. Without restrictive laws, payday lenders may charge exploitative fees. Even when it is just a few hundred bucks, stratospheric interest rates and recurring fees can send borrowers into a cyclic debt trap.
States have put up legislation to protect borrowers from such exploitative lenders. If you are looking for the best payday installment loans, Florida is one of the states with the best laws.
The state of Florida has imposed limits on the amount of interest that payday lenders can charge on short-term loans. This protects borrowers from having accumulating interests that may even exceed the initial loan.
Payday Loan: What is it?
A payday loan simply means a small cash advance to pay once they get paid for many people. It is a cash advance on a post-dated check that a borrower services to the lender.
When you take a payday loan, you sign a repayment check that corresponds with your next payment date before you are given the money. The check covers the amount you have borrowed plus the interest rate and other fees.
When you are issued a payday loan, the law states that the lender may not deposit the check until the signed date. If you need a payday loan, you should deal with a licensed lender.
In Florida, all payday lenders must comply with state laws. In case of a complaint, the law requires that the lender responds to an inquiry by the Office of Financial Regulation. Failure to do this might lead to license withdrawal.
Payday Loans Laws in Florida
The state of Florida places several limitations on payday lending. Some key areas that the law is explicit on include:
- The amount one can borrow
- The number of outstanding loans
- The fees and costs associated with the loan
- The loan term or duration
- The collection process upon failure to pay
1. Payday Loan Limits and Duration
The law states that one can borrow only an amount not exceeding $500, which can only be paid between seven and 31 days. So, you have between one week and one month to pay the loan.
The law also prohibits borrowers from taking another loan immediately upon the initial loan’s expiration or payment. You are required to wait at least 24 hours before taking another loan.
In addition to term limits, you cannot rollover the loan amount. For example, if you fail to pay the loan at the end of the agreed term, the lender cannot extend the period while charging the same amount of interest on the loan.
The rollover limitation protects borrowers by ensuring that the interest and fees associated with the loan do not become unbearable. The law advises the lender to seek other avenues rather than rolling over the loan.
3. Grace Period
You may be wondering what happens when you are unable to pay the loan on the agreed date, yet the law prohibits rollover. Well, the law provides for a 60-day grace period. If you suspect that you may not pay the loan on time, you can take advantage of this grace period.
To qualify for the grace period, you must also meet certain conditions. First, the borrower must present themselves to a credit counseling agency seven days before the original due date. Second, the borrower must complete credit counseling within the grace period.
After completing the credit counseling, the agency will recommend a way forward. If the agency recommends repayment, you will not be charged additional fees or interest. However, you must note that such events may dent your credit ratings.
4. Interest Rate and Fees
Payday loans can be costly due to their high-interest rates and additional fees. If left unchecked, unscrupulous lenders can take advantage of these fees and fleece borrowers.
The state recognizes the exorbitant nature of these fees and places limitations on fees and interest rates. In Florida, the law allows only a maximum fee of 10% on the initial loan amount. Other costs associated with the loan, such as verification fees, are limited to a maximum of $5.
Most people have loans because they may lose their valuable properties when they cannot pay the loan. This is common with certain types of loans, such as mortgages. When it comes to payday loans, the same law does not apply.
If the check fails to clear on the indicated date, you may incur additional costs apart from the initial fees. These may be any charges the bank may slap on the bad check. However, the lender may not file a criminal suit against the borrower for failure to pay.
Weaknesses in Florida Payday Laws
Despite Florida having laws that protect its residents from predatory payday lending, loopholes still exist that leave them vulnerable.
Online lenders that are not registered within Florida do not operate within the confines of Florida state laws. Consumer advocates argue that such lenders may take advantage of borrowers by subjecting their loans to federal laws.
Some lenders have banking partners. In a system known as ‘lend-a-bank,’ the lender uses a chartered bank regulated by federal law. This helps such lenders avoid state regulation and can charge higher, recurring fees, and interest rates.
In the rent-a-bank system, the bank gives the loan and then sells the borrowers’ details to a third-party lender. This way, they get a higher premium.
While rent-a-bank is not illegal, it is unethical. Federal regulations exist to deter banks from taking advantage of these loopholes, but in states like Florida, banks seem to be having free rein.
If you are experiencing a problem with your lender, you can request help from the state by filing a complaint. Word of caution, though! These laws, to a large extent, only protect borrowers taking loans within the state. In such a case, the state can come to your help if you have a problem with your lender.
If your lender is from another state and you obtained the loan via telephone or over the internet, the help you may get from the state may be limited.