A "payday loan" is a loan of short duration, usually two weeks, with exorbitant interest rates. The payday loan industry generates billions of dollars a year. States are cracking down on payday lenders, and the industry is regulated in the states where it is still legal.
Payday lenders require you to furnish a copy of your driver's license, and information about your employment and bank accounts. The loan is usually for a couple of weeks (the time until your next paycheck). The lenders do not perform a credit check, and you write them a post-dated check for the amount you want to borrow plus a fee. The fee is usually a "borrowing" fee and an account set-up fee. The lenders will then deposit your check after your payday if you have not already paid off the loan. If your bank account cannot cover the amount of the loan, you will then owe the original loan plus added interest. You may also incur overdraft fees from your bank. If you know you cannot pay off the loan in time, you can pay the borrowing fees (or finance charge) in order to renew the loan. The annual percentage rate (APR) for a payday loan often starts over 400 percent! This practice creates a cycle of consumer refinancing and continuous debt.
Payday loans are generally illegal in Georgia, unless made by a lender licensed by Georgia’s Department of Banking and Finance, though some lenders may qualify for exemption from licensure. Questions about an installment loan licensee should be directed to the Georgia Department of Banking and Finance. Lenders are subject to the terms and limitations of Georgia’s Installment Loan Act (O.C.G.A. § 7-3-1 et seq.), Payday Lending Act (O.C.G.A. § 16-17-1 et seq.), and usury law (O.C.G.A. 7-4-1 et seq.).
The federal Truth in Lending Act requires disclosure of the cost of credit. A borrower must receive, in writing, the finance charge (a dollar amount) and the APR, which is the cost of credit on a yearly basis. Payday lenders are subject to this regulation.
Usury laws limit the interest rate amount a lender can charge. In Georgia, a licensed lender cannot charge more than 10% interest on a loan of $3,000 or less. Most states have a usury limit; if you were to borrow money from an out-of-state lending institution, that state’s cap would apply. Bear in mind that these rates may differ from Georgia’s rates.
The Georgia Department of Law's Consumer Protection Division does not handle complaints relating to payday lenders.
- Georgia victims of a payday lender should pursue criminal action through their local district attorney or solicitor.
- Georgia victims should also report the incident to the Georgia Department of Banking and Finance.
- Georgia victims should also report the experience the Consumer Interest Section of the Georgia Attorney General's Office by mail only. Be aware that the Attorney General's Office does not take action against unlawful payday lenders on behalf of any one consumer, but acts for the benefit of the State of Georgia as a whole. Additionally, it cannot provide consumers legal advice regarding what actions to take with unlawful lenders. The mailed complaint should be submitted to:
Office of the Attorney General
Division 1, Consumer Interest Section
40 Capitol Square, SW
Atlanta, Georgia 30334
- Any victim who believes that the lender violated the Truth in Lending Act should file a complaint with the Federal Trade Commission (FTC). An online form is available for the complaint. The FTC cannot solve individual problems, but will be able to act if it discovers a pattern of violations.
There are ways to avoid needing a payday loan:
- Make a realistic budget and figure your monthly and daily expenditures to eliminate unnecessary purchases.
- Contact your local consumer credit counseling service, credit union, or nonprofit credit counseling provider if you need help planning a budget.
- Plan on using only one credit card for purchases so you can limit your debt and track your expenses.
- Look into the availability of overdraft protection on your checking account.
- Compare offers when shopping for credit and look for credit with a low APR and low finance charges.
- Ask creditors for more time to pay your bills, and inquire whether they will charge you more fees for that service.
Loans made by pawnbrokers are regulated at the state level in Georgia, but local governments can impose stricter limitations. Pawn shops are licensed by county and municipal governments and monitored by the local police or sheriff's department. Complaints about pawn shops should be reported to the appropriate local law enforcement authority.