Payday Lenders the Target of State Legislation

More and more states are beginning to pass legislation designed to limit how payday lenders can operate. This is because these lenders are considered to be ‘predatory’ and their extremely high interest rate charges help to only further the detrimental cycle of debt. As the economic credit crunch has further limited the amount of borrowing options available to people, especially those with poor credit histories, payday lenders are getting rich by sending people into bankruptcy.

How Do Payday Lender Hurt Borrowers?

Payday lenders offer consumers the ability to access money for basic needs before they receive their next paycheck. They harm consumers because they charge up to 400% in annual interest on such loans. This makes it almost impossible for the borrower to repay their debt by the time their next paycheck arrives, usually forcing them to lend against next week’s paycheck as well. This furthers the cycle of debt and forces many people into bankruptcy.

The recent economic downturn and resulting credit crunch has severely limited options for people looking to obtain a loan. Banks now have much stricter loaning standards and are may be off limits to people with poor credit. This means that more people will use these lenders and accruing more debt can lead to having to file for bankruptcy, according to a Chicago bankruptcy lawyer.

New Regulations

Many states are attempting to pass laws that will limit the amount of interest a payday lender can charge in an attempt to protect consumers. Some states are hoping to make these types of lenders illegal all together. It will take some time to see if these state’s new laws will have the intended effect.

If you are in debt and struggling to escape having to use payday lenders as a source of money, then you should carefully consider your options. In certain cases filing for bankruptcy may be necessary in order to start over again. You can reach a Chicago bankruptcy attorney by calling: (‎312) 878-0035 or visiting 125 South Wacker Drive, Suite 300, Chicago, IL 60606 for answers to your questions.