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Payday Loans

Payday loans have become a multibillion dollar industry in recent years.  There are over 10,000 payday loan stores across the country.  Nevertheless, it is illegal in Georgia to make a payday loan.

Payday lenders require you to furnish a copy of your pay stub, identification, and a copy of your bank statement to get a short-term loan, usually for about two weeks.  They do not perform a credit check, and you write them a post-dated check for the amount you want to borrow, plus a fee of $15 to $30 for every $100 borrowed and an account set-up fee.  They will deposit your check if you are unable to repay your loan.  Otherwise, if you cannot pay off the loan in time, you must pay the borrowing fees to renew the loan.  The annual percentage rate (APR) for a payday loan usually starts at about 390 percent! 

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. 

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.

There are ways to avoid needing a payday loan:

• Compare offers when shopping for credit and look for credit with a low APR and low finance charges.
  
• Ask creditors for more time to pay your bills, and inquire whether they will charge you more fees for that service.
  
• Make a realistic budget and figure your monthly and daily expenditures to eliminate unnecessary purchases.
  
• Look into the availability of overdraft protection on your checking account.
  
• Contact your local consumer credit counseling service, credit union, or nonprofit credit counseling provider if you need help planning a budget.
  
• Plan on using only one credit card for purchases so you can limit your debt and track your expenses.
  

Pawn Shops

These are licensed by county and municipal governments and monitored by the local police or sheriff's department.  Complaints about pawn shops should be reported to the appropriate local law enforcement authority.