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Uniform Payday Loan Legislation May Be In The Offing

Payday loans are popular in America, the United Kingdom, Australia and Canada, while in some other nations other options replace the payday loan. Payday loan legislation varies from state to state within the United States. A uniform legislation is absent even in the United Kingdom, Canada or other nations where these short term loans are offered.

The legislation across America attempts to stem the exorbitant cost of these types of loans by placing a number of restrictions on them. A few states have no payday loan legislation at all and the lenders are given a free hand to conduct their business the way they deem best.

Most states across the nation have payday loan legislation restricting the maximum amount of money that can be obtained per transaction, to the maximum number of transactions per year. Some States have even capped through payday loan legislation, the number of times a lender can extend a short term loan to the same client.

In recent times, the Congress is focusing on a more comprehensive payday loan legislation that covers the entire short term loan industry across the nation. If the CFPA (Consumer Financial Protection Agency) finally has its way, the proposed payday loan legislation can serve as a strong game changer for the industry.

The CFPA argues, that loopholes in the legislation enacted by the states are being exploited by the lender, to the detriment of the borrowers. Among the slew of measures suggested is a 36% cap on interest charges. Another measure which the CFPA has suggested is the maximum number of times that a borrower can resort to payday loans in a calendar year. Many states have placed a cap of 12 payday loans in a year per borrower through appropriate legislation. The CFPA recommendation is to slash this to a maximum of 6 per year.

While the Congress appears determined to reign in the payday loan industry, the industry itself is engaged in hectic lobbying to ensure that payday loan legislation detrimental to their interests is defeated. Industry leaders argue that the high rate of interest and the absence of serious regulation are the driving forces behind the payday loan industry and any attempt to curb these factors can potentially turn into a serious threat to the very existence of the industry.

For the borrowers however, a comprehensive payday loan legislation is likely to be extremely beneficial because the loans would be less pricey. The flip side however is that a large number of overzealous lenders may disappear forever, making it that much more difficult to access a payday loan when needed. But a uniform payday loan legislation may be in the offing sometime soon.

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