Maryland Payday Loan Laws and Legislation
In the state of Maryland payday lending is considered illegal.
Under the term payday loan is understood short-term unsecured cash advances given against a borrower's next paycheck. Generally, such loans are given for a period of two weeks. They are very convenient in case a person is not eligible for a bank credit. These loans are very expensive in terms of interest rates, or finance charges, that are expressed in dollars. Sometimes their APR achieves 3-digit number amounts and in other cases can amount even to 1,000%.
Such loans can be convenient in terms of speed and easiness of access but they can turn out a real trouble for middle-class residents. High interest rates can lead a borrower into even worse financial trouble. Therefore, in the state of Maryland the following law was passed in 2002: Senate Joint Resolution 7. It reads that payday lending is illegal in the state of Maryland and every lending business that wants to operate in the state will have to comply with the state law. As of it, lenders are prohibited to charge more than 33% APR (it equals 2.75% a month). All the lenders charging more than this will be considered as violating the law.
The procedure of getting a payday loan is simple. For example, a borrower needs $100 to cover some urgent expenses, so he applies to a company and gets the money in return for a post dated paycheck. A post dated paycheck, which amounts to $115, is signed and dated of the next payday and a lender cashes it exactly when it's due. Thus, this $15 is the finance charge of a lender. If calculated in the terms of APR, it equals to 390% and this is already a violation. In case a person is unable to repay in due time and wants a rollover, it will cost $15 more. All these charges and amounts are considered usury in the state of Maryland and are illegal. However, not all residents are aware of this fact and there are borrowers trapped into the circle of indebtedness because they do not know both laws and their rights.
The Office of the Commissioner of Financial Regulation is in charge of all the businesses in any respect dealing with lending - be it banks, or large and small finance companies, as well as check-cashing businesses. It provides licenses and supervises the operation of the aforementioned companies as well as gets complaints and handles all the violation cases. This is the place to go if you think that illegal lender victimized you.
It is also forbidden to lenders to make any attempts at collection debts from borrowers. Any phone calls requiring repayment are illegal and any other actions of the kind let alone criminal ones are violation of the law and all the borrowers under the impression that they are treated illegally are eligible to contact the Commissioner of Financial Regulation in order to deal with it.
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