Other Types of Loans

• Author: Daniel A Edelman
• Profession: Lawyer
• Pages: 45-46

45

Other Types of Loans

CHAPTER

12

Payday and Auto Title Loans

Avoid payday and auto title loans, as well as “installment” loans offered by the same establishments that

make payday and auto title loans. These loans have interest rates ranging from 99 to 1000 percent and

more. Although the lenders claim that you are really paying a one-time fee of $10 to $20 per $100, sta-

tistics show that very few people obtain only one high-interest loan. Rather, people repeatedly refinance

loans or obtain new loans to pay off old ones, so that a borrower who gets into the payday loan trap has

eight to twelve loans in one year.

Many high-interest loans are obtained over the Internet. If you have obtained one of these loans,

check with your state attorney general or financial institutions regulator to see if your state requires

licensing for high-interest lenders and whether your lender has a license to make loans to residents of

your state. Loans made by unlicensed lenders may violate usury laws, giving rise to substantial statutory

damages, or be unenforceable. In addition,

attempts to collect such loans by debt

collectors may violate the Fair Debt

Collection Practices Act.

Some lenders claim that they

are exempt from state interest regu-

lations because they are purport-

edly located offshore or on Native

American reservations, but courts have

usually disagreed.

Overdraft Protection

Many banks offer overdraft protection for checking accounts. They are now required to obtain your

affirmative agreement to provide this.

WARNING

Avoid payday and auto title and

other high-interest loans.

Edelman53574_Ch012.indd 45 22/05/17 10:26 AM