PayDay Loans Beyond

The Rights and Responsibilities of Payday Loans

As with most other things in life, it pays to know your rights when it comes to payday loans. Payday lending is legal in 37 states, and each state has its own laws governing payday advances. However, there are some federal laws about payday loan practices designed for consumer protection. Ignorance of the law is never a good defense, so arm yourself with knowledge!


Active duty military members and their spouses and dependent children are protected under the John Warner Defense Appropriation Act of 2007. Payday lendersday loan companies may not charge 36% interest or greater on payday advances. They are also forbidden to use postdated checks or electronic check processing (using the account and routing number from a check) to collect on payday loans made to members of the military and their families.

Typical State Protections

Though each state that allows payday loans makes their own laws, several basic provisions are universal. Usury is the practice of charging an interest rate so high, the borrower is unlikely to repay the debt within their lifetime. Every state defines usury by its own standards, but if a payday loan company is found guilty, they will face state sanctions. If they are found to charge at least twice the state maximum interest rate, they will receive federal usury charges. Familiarize yourself with your state’s usury laws before agreeing to a loan as they are there for your protection.


Payday lenders are required to present the terms of their loans in clear, straightforward language, and the conditions are to be printed in bold text. The payday advance contract must be printed in the language in which the transaction was carried out.

Terms and Limits

Most states regulate how many payday loans a consumer can have at one time, and several have enacted a “cooling-off period” after a number of consecutive loans in which they cannot borrow for a predetermined number of days. The maximum amount of money loaned, the annual percentage rate (APR), finance charges, and total amount of payments must also be disclosed in the payday loan contract.

Collection Practices

Debt collectors may only call payday loan debtors from 8am to 9pm. They cannot call on holidays or when their collection center is closed. The Fair Debt Collection Practices Act bars collection agents from threatening payday advance customers with criminal charges (such as check fraud) if they default on a payday loan because payday loans are civil debts and cannot be pursued by law enforcement. Collectors may not disclose any information about the debt or debtor to family, employers, or anyone else who is not involved in the defaulted payday loan.

Also, collectors are prohibited from threatening to charge any fees in excess of those outlined in the original contract. All collection activities must cease if the debtor files for bankruptcy. As in many aspects of American commerce, consumer protections are in place for those who take out a payday loan. This list is by no means comprehensive, and a review of state law is strongly advised should you choose to obtain a payday advance. When money is tight or an unexpected expense crops up, a payday loan can be exactly what you need to make it through until your next paycheck. They require no collateral and do not require the borrower to pass a credit check. However, the process can be a bit. Even with the best of financial planning, emergencies happen to everyone. The car breaks down, an illness or injury sends you or a loved one to the emergency room, or perhaps you need to travel suddenly to tend to a family emergency. A payday loan often referred to as.