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 Idaho, payday loans are legal and regulated by the Idaho Credit Code (Idaho Code Ann. § 28-46-401 et seq.) and the Idaho Payday Loan Act. Lenders must be licensed by the Idaho Department of Finance. The state imposes no limit on loan amounts, but payday loans cannot exceed 25% of the borrower's gross monthly income. The maximum loan term is not specified, but the loan cannot be made for less than 14 days. The finance charge for a 14-day $100 loan is capped at $30, and the APR for a 14-day $100 loan is capped at 652%. Rollovers are not permitted, and borrowers are allowed to have only three payday loans at one time from all lenders combined. Regarding car title loans, Idaho law permits them under the same legal framework and requires lenders to provide borrowers with a written agreement outlining the terms of the loan, including the amount borrowed and the interest rate. If a borrower defaults on a car title loan, the lender may repossess and sell the vehicle to recover the debt. The Federal Trade Commission (FTC) also protects consumers against unfair and deceptive practices by payday and car title lenders on a national level, enforcing laws such as the Truth in Lending Act and the Electronic Fund Transfer Act, and taking action against illegal debt collection practices and evasion of consumer protection laws.