Payday Loan Turf War Reaches New York

By: Jvi Calderon
Payday Loan Turf War Reaches New York

The economic recession was a dream come true for payday lenders (though this is not meant to suggest that they are as sinister as legislators make them out to be). Not only were Americans suddenly a little lighter in the pocket, and searching for options to get them through until payday, but the near market collapse was caused by the irresponsibility and greed of big banks, and even managed to take a couple of them down in the mess. Suddenly, Americans were in need of cash and were less willing and less qualified to go to banks for it – a perfect scenario for the rise of short-term credit loans.

For the past several years we have seen state after state take a stance on payday loans. Many have followed the crowd and adopted a 36% APR limit; effectively legislating cash advance loans out of the state. Other states, like Wisconsin, have recognized that these loans can help their citizens, and have merely set out to create a landscape where they can protect their citizens while allowing lenders to operate.

The state of New York has never allowed non-bank financial institutions to offer short-term loans. However, a bill is pending in both chambers of the New York State Legislature that would allow licensed check cashing stores to do exactly that. The bill would set a limit between $300 and $2,000 and a term limit between 90 days and six months. The bill would even exempt these loans from the state’s 25% usury cap for personal loans.

While critics are outraged by the exemption, if we have learned anything from payday loan regulation in other states is that a 36% cap is tantamount to a death sentence.

Supporters are even trying their best to stay away from the “payday loan” title – pointing out the fact that payday loans are repaid all at once, and the loan products being outlined in the bill would be repaid in installments of less than 10% of the consumers monthly income.

The bill is intended to provide New York consumers with a regulated, safe and helpful solution to temporary credit problems.