Alabama Payday Loan Laws

Alabama has very specific payday loan laws as stated in the Alabama Deferred Presentment Services Act, Title 5, Chapter 18A that lending service companies must follow.

• Maximum APR – 456.25 percent
• Maximum Finance Fees – $17.50 per $100 dollars
• Maximum Financing Interest – 17.5 percent
• Maximum Quantity of Loans at One Time – One
• Maximum Payday Loan – $500 dollars
• Loan Term Limit – 10 Days
• Loan Term Maximum – 31 Days
• Total Number of Extensions: One
• Loan Default Collections Actions Permitted: Non-criminal (exception for NSF checks)

Even with these payday loan laws, shady lenders utilize the loopholes that can be found in these regulations. For instance, lenders are allowing their customers to pay off one payday loan with another. This way they are technically within line with the law, but the borrowers are staying in debt.

This lending practice is dangerous for Alabama residents. Staying trapped in this hamster wheel of revolving debt makes it difficult to ever get past the need to continuously borrow. This loophole abused by many of the more than 1,000 payday lending service companies makes it almost a sure thing that their clients will eventually default on the loan.

Another way payday lenders bypass the laws is to operate out of the state and/or the country. Many of these predatory lenders pass their companies off as an Alabama based business. However, the lenders are able to charge well over 456.25 percent Annual Percentage Rate allowed by Alabama payday regulations. Many are even able to get around the state’s small loan laws in approving over the $500 dollar maximum and still call it a payday loan, by operating out of state.

Payday loan borrowers must be careful when choosing a lender and should check where the company is located. One way to tell if a lender is not reputable, is by their usury interest rates. They should not be more than seventeen and a half percent. Even an eighteen percent financial interest rate means they are not local to Alabama, as it is illegal.

In addition, lenders that have found a loophole in the payday laws will have loans under the ten days or longer than the 31 days set by lawmakers. Alabama is one of the few states with the highest in the Unites States. However, predator payday loan companies are always on the lookout for ways to show their greed by seeking out ways to bypass any law and restriction they can.

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