All Consuming - Financial Litigation Insights: Issue 7, October 2020

Is a Cap on Payday Loan Rates About Protecting the Poor or Eliminating a Service?

"Industry representatives say the proposed cap would drive most, if not all, payday lenders out of business and leave their customers without good alternatives when they need money."

Why this is important: There are various arguments both for and against payday loans in the context of a new Nebraska bill that would limit the interest rate on those loans. Sometimes called cash advances, check advances, or delayed deposit loans, these loans are short-term loans that when projected out over an annual basis cost the borrowers more in interest than traditional financing. Critics complain these loans prey on the poor and people in emergencies. According to a Nebraska report, in 2019 payday loan borrowers paid the equivalent of 405 percent annual interest. Even a local clergy is quoted in the article as speaking out against the loans....

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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