What are payday loans? Legitimate lenders, like credit unions and banks, If you do not repay your loan, the lender may Payday loans are loans that last for a short review a borrower’s ability to repay a loan. ask for and collect only the following: time (usually 2 weeks) and have very high Payday lenders do not. • the amount you borrowed and did not repay interest rates. These loans are sometimes plus the finance charge called cash advance loans, check advance Their business is built on making loans • a returned check fee of no more than $30 if loans, post dated check loans or deferred borrowers cannot afford to completely repay, so that they will keep coming back and getting new your check bounces, you stop payment on deposit loans. your check or you close the account loans and paying new fees. • court costs and attorney fees if the lender How does a payday loan work? Are there limits on payday loans? takes you to court and wins, but only if a You write a postdated check for the amount provision allowing for attorneys fees is you want to borrow plus a finance charge or Yes. There are limits under Montana law. included in the loan agreement lender’s fee. • Montana law now allows for collection • The maximum amount a payday lender agencies to seek treble damages or a $500 The lender gives you the amount of the check can lend a borrower at one time is $300. bad check fee in collecting the debt. minus the finance charge and agrees to hold The minimum is $50. the check until your next payday. If you do not • The lender may not charge more than What information must a repay the loan before your next payday, the 25% of the amount on the face of the payday lender give you when lender cashes the check. postdated check in finance charges or fees. you take out a loan? • The amount of time you have to pay Why are payday loans back the loan cannot exceed 31 days 1. A pamphlet that: considered “Debt Traps?” and can only be extended if no additional • explains the borrower’s rights and Payday lenders do not allow partial payments. finance charges are made. repayment responsibilities, In Montana, lenders may not charge a fee to • Payday lenders are prohibited from • includes a telephone number for the extend a payday loan’s term, so they use the charging a fee to renew a loan, but the Department of Administration Division of back-to-back method. back-to-back method gives them a way Banking and Financial Institutions around this prohibition. • informs the borrower that the above This method involves a borrower repaying the • A lender may not give more than one department can tell him whether or not the loan in full when it comes due, but realizing loan to the same borrower at the same lender is licensed and give him other legally after repayment that they do not have enough time, and the total of the loan must be available information. money to last them until their next payday. $300 or less. 2. A written agreement that can be kept by the This forces him to take out a new loan and pay • A lender may not accept repayment of a borrower that includes: new fees right after paying back the old loan, payday loan with proceeds from another payday loan that it or its affiliate made. • the name, address and phone number of this pulls the person into a cycle of debt that is the lender and the initials of person making very difficult to escape. What can a payday lender do to me if I loan don’t repay my loan? Can I go to jail? • the name, address and phone number of A typical bank or credit union loan has an APR the borrower of 10% to 18%. A credit card cash advance can carry an APR of 25% to 30% on the high No, a payday lender cannot use or threaten to • a listing of fees and interest charges to be end. A payday loan’s APR can be as high as use the criminal process to collect your loan. paid by the borrower 869%. • a clear description of the borrower’s payment obligations and directly MLSA HelpLine: (800) 666-6899 Montana Legal Services before the borrower signature line in Need legal help? Call the HelpLine 14 point bold print the words: Monday-Friday 7:30am to 5:15pm and Association Saturday 9:15am to 12:45pm. You cannot be prosecuted in criminal court for collection of this loan. MLSA staff will help you apply over the telephone. If you qualify, you could: Failure to provide any of the above Payday Lending information is a violation of Montana law. • get an appointment with an MLSA advocate, or What can I do if a payday lender • be referred to a free attorney, or violates the law? • get signed up for a self-help class, or • get self-help materials. If a payday lender violates the law, you may be able to sue for damages caused www.MTLSA.org to you as a result of the violation, Find copies of all our brochures online. statutory damages of up to $1000 per They are all available for free download! violation, and court costs and attorneys fees. Also, consumers may bring class www.MontanaLawHelp.org action lawsuits against payday lenders. Need legal information? Go online. What are some cheaper alternatives Visit www.MontanaLawHelp.org. Providing, protecting, and enhancing to payday loans? access to justice. You can find information about legal • A small loan from a credit union or a problems such as divorce, parenting small loan company plans, landlord and tenant issues, and • Ask your employer for an advance on public benefits. You can also find your paycheck information about getting legal help, community resources, and courts. • Ask a friend or relative to loan you money Can’t find what you want? Use LiveHelp. Rev. 09/08 Click on the LiveHelp picture and get help The following will be cheaper alternatives finding the information you need. in most cases, but always compare interest rates before you borrow money: This pamphlet is meant to give basic legal • A cash advance on a credit card information, not legal advice about your problem. The law changes often and each case • Overdraft protection on your checking is different. This pamphlet may not apply to account your problem. You should not rely on it only. Please talk to an attorney about your problem.