Montana Payday Loan Laws

Montana is a very confused state when it comes to payday loan laws. While some regulations seem strict for lenders, there are practices that do not protect consumers well. SB 165 states that the borrower can rescind on a loan one day after requesting it. It also states that lenders can require arbitration when a borrower does rescind on the loan request.

• The maximum APR in Montana can be up to 650%
• Finance charges and fees cannot exceed 25% of the face value of the check
• Loans cannot exceed $300
• The minimum term is 14 days
• The maximum term is 31 days
• Two loans can be obtained at once
• Rollovers, renewals and extensions are prohibited
• Legal action can only occur if the check is returned on a closed account

In Montana, the process to obtain a license to open a payday loan establishment appears to be strict. Lenders must provide asset reports, sources of income, resources, liabilities and proof that they the sufficient amount of funds available. Legal action cannot be threatened to borrowers by a lender if the loan is defaulted on. The only stipulation to this law is if the check of the borrower was drawn on a closed bank account. Lenders are not permitted to divide loans into parts to obtain additional finance charges. Lenders are only permitted to charge one $15 fee if a borrower defaults on their loan.

Consumers are not protected well in Montana. The state does not require the lender to provide a list of fees or payment schedules when a payday loan is obtained. This allows the opportunity for borrowers to default much more easily. The ability to have two loans at one time increases the chances of a borrower defaulting on their loan. With no cooling off period in place, this also reduces protection for consumers.

In Montana, these payday loans are such a vicious cycle. Consumers, that are already struggling financially, become even more in debt. Many have ended up filing for bankruptcy; have lost their homes and their cars. The financial ruin that can come from these lax payday loan laws in Montana is just astonishing. Lenders may have to follow strict guidelines to get set up, but the amounts charged in interest hurt the consumer significantly. It is hard for the lenders to practice bad business, and it is easy for consumers to get caught in the loan web.

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