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61. |
What is SB 834 and what does
it do? |
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SB 834 is act which provides
the Governor or the Director of the Office of Administration shall
recognize a state employee collective bargaining unit, upon approval by a
majority of the unit’s employees. The key points of this act are:
- Allowable fee for payday loans are
reduced: The bill thus keeps the charges as much as what the
Financial Code currently allows for small loans made by licensed finance
lenders. The charges would be $5 as the set-up fee, maximum interest
rate of 36% per year (it would be 3% for a month and 1.5% for 2 weeks).
Thus, a $100 would cost $6.50 for 2 weeks which includes $5 as set-up
fee and $1.50 as interest) which would have before $17.50 overall. A
$200 loan for 2 weeks would cost 8$ now, before it used to cost $35.
- Facilities like consumer protection:
( i ) Rollovers: Due to this facility the lender cannot charge the
extra fee from the consumer if he/she extends the time for repayment of
the loan. Also, the consumer can only apply for the second loan after
the 30 days of the completion of the first loan.
( ii ) Improved disclosures: According to this the consumer should get
the notice well in advance stating that the borrowers are not subjected
to the prosecution for any bad check or bouncing of the checks if they
are unable to repay the loan.
( iii ) Stronger penalties for violations: If the lender intentionally
violates a law, then the bill allows the consumer to have the civil
penalties of $2000 plus the cost of actual damages and punitive damages.
- Increased regulatory oversight by the
Department of Justice:
( i ) Licensing and bonding: All the lenders should have a license
to lend money and they also have to maintain a bond to pay claims
brought by consumers.
( ii ) Record-keeping: A record should be maintained to ensure the
following of law.
( iii ) Reporting: A report must be filed annually mentioning the detail
of loan volume, APR of loans and length of loans with other information.
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62. |
Are there any alternatives for
Payday loans? |
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There are alternatives for
Payday loans like:
- Negotiation with creditors regarding
payment plan: Consumers should set up a payment plan with their
creditors regarding partial payments. For this they may take help from
Consumer Credit Counseling Services (CCCS). This is the most suitable
things rather then taking up loans with high interest and getting into
more debt.
- Credit Cards/Secured Credit Cards:
Consumers can utilize these cards on the things on which they can get
credit up to some amount. Another option is Secured Credit Cards which
are tied to the Savings account of the consumer. Thus, a consumer can
get only the credit of what is there in his/her account.
- Paycheck in advance from employers:
Some of the employers would give their employees their paycheck well in
advance, if demanded by the employee.
- Credit Unions: Many employees
join the credit unions which gives small and short-term loans to their
members. Here the affiliation requirements are less strict.
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63. |
Why do extensions have extra
charges? |
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Generally payday loans are meant to be for
some emergency need of cash. Due to extension the consumer would be in
dependent to it. To avoid this so that the consumer may not take further
extensions for the fear of paying more interest. |
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