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Payday Loans In Georgia

A payday loan is a small cash advance borrowed from a lender for a short period of time, usually 7 days to 14 days, with very high interest rates. For example, a payday loans Georgia amount of $100 has a fee of $15 for a period of 14 days whereby the annual percentage rate is a whooping 360%. The loan has to be repaid at the end of 14 days along with the fees, however if a person is unable to repay the loan the loan is extended or rolled over with additional fees, there by trapping the borrower in a cycle of insurmountable debt.

Several surveys conducted by various organizations have shown that the borrowers usually are unable to repay the loan and sometimes borrow from another payday lender to repay a loan trapping them deeper in debt.

People with a small but fixed income, the military, single mothers, the minority communities and the elderly solicit payday lenders who offer them a quick solution to cash management problems. They usually have no savings whatsoever and no access to other forms of credit. The hassle free, impersonal method of obtaining the loan, the speed at which these loans can be got, ignorance and illiteracy are other factors that contribute to people opting for payday loans. By presenting a pay stub and a post dated check a person can get a payday loans Georgia in a matter of a few minutes making it convenient for those who have a bad credit history to obtain loans when there is a cash crunch. The borrowers hardly realize that they are paying more on the fees and the interest or that they are being charged annual percentage rates as high as 360% to 780%.

Payday loans Georgia lending has become the most profitable money lending business in the United States of America. It is a rapidly expanding business as the profit margin is astounding, nearly 34% pre-tax return. The lender needs just a small capital to start the business; banks are also playing an active part by lending the capital to the payday lenders.

On April 15, 2004, Georgia passed a law that makes payday loans georgia lending punishable with a one-year prison term and a $5,000 maximum fine per loan. After due consideration the bill was passed prescribing harsh felony penalties to those who violate the law. The new law prohibits loans of $3000 or less if the loan violates Georgia's usury laws. The new payday lending law caps the annual percentage rate at 16%. Some of the key provisions include

• Borrowers can sue the payday lenders three times the total amount of all the interest and the charges plus the attorneys' fee and court costs.

• District Attorney and the Attorney General are authorized to bring civil action on behalf of the State seeking three times the amount of all interest and charges. The district attorney may keep half of any recovery for their office budget.

• Class actions against payday lenders are authorized.

• Illegal payday loans are declared void and lenders are barred from collecting the indebtedness.

• Payday lenders were declared as a public nuisance.

• Tax equal to 50% of all proceeds from payday loans is imposed as penalty.

• Payday lenders are not permitted to obtain certificates of authority to do business in Georgia from the Secretary of State and the Department of Banking and Finance. Payday lenders with existing certificates will face revocation.

• The law bars non-bank lenders from partnering with out-of-state banks in order to avoid Georgia's usury limit.

• Adequate protection has been provided for military personnel and their families.

• The lender is prohibited from garnishment of any military salary or wages.

• The lender is prohibited from collecting the loan from a military customer or his family if the military member has been deployed to a combat or combat supporting position, for the duration of the deployment.

• The lender is prohibited from contacting the commanding officer in an effort to collect the loan from the military personnel who borrowed it.

• The lender must agree to be bound by the terms of any loan repayment plan that is negotiated through military counselors or credit counselors.

• The lenders must agree to honor any statement or proclamation by a military base commander that a specific payday lender has been declared off limits to military personnel or their family members and not solicit military personnel.

Some exceptions are persons engaged in financial transactions pursuant to:

• The laws regulating financial institutions as defined in Section 7-1-1 et seq.

• The laws regulating state and federally chartered credit unions.

• The laws regulating Georgia residential mortgages.

• The laws regulating Georgia Industrial Loan Act.

• The laws regulating Georgia Credit Card Bank Act, including assignees.

Such loans are lawful under the terms of:

• The Retail Installment and Home Solicitation act.

• The Motor Vehicle Sales Finance Act.

• Pawnbrokers making the loans that are lawful under the pawn statues.

• Loans made by federally chartered banks and thrifts.

• Loans made by state banks insured by Federal Deposit Insurance Corporation.

• Tax refunds anticipation loans.

The bill, passed in the year 2004, referred to as the Payday lending act of 2004 authorizes felony and racketeering charges against violators as well as a fine of $25,000 and a possible jail sentence of 25 years. Payday loans are illegal in the State of Georgia. The Georgia State Payday Lending law has been regarded as model legislation in the fight against the plague of payday lending. The law has made it impossible for payday lenders to abuse the citizens of Georgia by charging them exorbitant APR thereby not entrapping them deeper in debt. The military, single mothers, the elderly and the minority communities have been protected adequately by the law from the predatory loan sharks that the payday lenders are. The law protects the citizens of Georgia from a growing menace to society, Payday lenders.

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