Small Town News

Loan borrowers, lenders face new rules this year

---

State finance officials welcomed 2010 with new rules for payday loan borrowers and lenders.

A payday loan is a small, unsecured, high-interest, short-term cash loan. In most cases, consumers write a post-dated, personal check for the advance amount, plus a fee. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check.

State lawmakers passed two new payday-lending laws in 2009. The most recent changes went into effect Jan. 1.

The measures limit a total loan amount to $700 or 30 percent of the borrower's monthly income -- whichever is less. The law also limits the number of loans a borrower can take to eight in a 12-month period.

Lawmakers also created a single database for all payday loan companies to enter borrower data, thereby preventing lenders from making larger loans or more loans than is legally allowed.

The new system replaces the previous payment plan with an installment plan for borrowers who cannot pay back their loan as agreed. The installment plan is available at the borrower's request at any time before his or her loan is due. The installment plan provides a longer payback time with no additional fees.

New loans may not be made to borrowers in default or paying back existing loans on an installment plan.

The other law became effective July 26. In the past, when a payday loan company collected its own debts, the lender was not subject to the State Collection Agency Practices Act, which includes protections for consumers. The law protects consumers from harassing or intimidating behavior when payday loan companies collect their own debts. If a consumer is harassed, he or she should contact the Department of Financial Institutions to file a complaint. Visit www.dfi.wa.gov and follow the link for "File a Complaint."

All payday lenders offering services to Washington residents -- including Web-based payday lenders -- are required by state law to be licensed by the state Department of Financial Institutions before doing business in the state. Some online payday lenders offer services that are not legal in Washington.

Verify the license of a payday lender by calling 877-746-4334 toll-free or verify a license online. Visit www.dfi.wa.gov and follow the link for "Verify a License."



Copyright 2010 The Issaquah Press, Issaquah, Washington. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2010 The Issaquah Press Issaquah, Washington. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

More from The Issaquah Press