Payday Loans
Many consumers who need cash quickly turn to payday loans—short-term, high interest loans that are generally due on the consumer’s next payday after the loan is taken out. The annual percentage rate of these loans is usually very high—sometimes 390% or more. In recent years, the availability of payday loans via the internet has increased significantly. Unfortunately, some payday lending operations have employed deception and other illegal conduct to take advantage of financially distressed consumers seeking these loans.
The Federal Trade Commission (FTC) enforces a variety of laws to protect consumers in this area. The agency has filed many law enforcement actions against payday lenders for, among other things, engaging in deceptive or unfair advertising and billing practices in violation of Section 5 of the FTC Act; failing to comply with the disclosure requirements of the Truth In Lending Act; violating the Credit Practices Rule’s prohibition against wage assignment clauses in contracts; conditioning credit on the preauthorization of electronic fund transfers in violation of the Electronic Fund Transfer Act; and employing unfair, deceptive, and abusive debt collection practices.
The FTC has also filed recent actions against scammers that contact consumers in an attempt to collect fake or phantom payday loan debts that consumers do not owe. Further, the FTC has filed actions against companies that locate themselves on Native American reservations in an attempt to evade state and federal consumer protection laws.
Car Title Loans
A car title loan is also a loan made for a short period of time—often for only 30 days. To get a car title loan, you must give the lender the title to your vehicle. The lender gives you cash and keeps the title to your vehicle. When it is time to repay the loan, you must pay the lender the amount you borrowed, plus a substantial fee—25% of the amount you borrowed, for example.
If you borrow $1,000 for 30 days, and the lender’s fee is 25%, you must repay the lender $1,250 30 days later. And if you are not able to repay the money when it is due, the lender may take or seize your car and sell it to satisfy the loan. This can be devastating for someone who relies on their car to get to work or to the grocery store.
In Florida, payday loans are regulated under the Florida Statutes, specifically under Chapter 560, which governs money transmitters and check cashing, and the Florida Deferred Presentment Act. Payday loans in Florida are limited to $500 with terms not exceeding 31 days. Lenders are required to check a state database to ensure borrowers do not have outstanding payday loans. The fees charged by payday lenders are capped by law, typically not exceeding 10% of the loan amount, plus a verification fee. The annual percentage rate (APR) for payday loans in Florida can be high, but it is regulated to not exceed the legal limits. Car title loans are also legal in Florida and are governed by the same chapter, with additional regulations under Chapter 537, the Florida Title Loan Act. These loans require borrowers to use their vehicle title as collateral. The law caps interest rates on title loans and requires clear disclosures about the loan terms, including the APR and fees. Borrowers must be provided with a grace period before a lender can seize the vehicle, and there are restrictions on how lenders can repossess and sell the vehicle to satisfy the loan. Both federal and state laws aim to protect consumers from deceptive and unfair practices by lenders, and the Federal Trade Commission actively enforces various consumer protection laws against payday and title lenders who engage in illegal conduct.
