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Payday Loans are banned in 12 states and Washington DC
Currently, there are 13 states including Washington DC that prohibit payday loans in the US. These states are Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia. Apart from these, there are also a few states that regulate the payday lending very strictly and in other states, payday lending has fixed interest rate caps to comply with. There are still some states where payday lending legality is not questioned or is considered prohibiting.
Why states are banning payday loans?
Payday loans are the instant short term loans that are granted to the people with bad or no credit history and are in dire need of cash. But still, every other state bans payday lending in the United States. Let us know the reasons for the prohibition.
- There are many cases where people end up taking another payday loan, in order to pay the existing ones. People are getting entangled very badly into the vicious circle of borrowing and repaying loans.
- Such loans charge a higher rate of interest as compared to all other types of money lending. This curb healthy business practices in the financial industry.
- Getting easy cash has turned out to be a bad habit of borrowing money for every little necessity of life. They sometimes get money to buy a pair of luxury brand dress or to buy groceries or to pay trivial utility bills.
- The collection techniques are extremely harsh sometimes, on untimely payments of the loan money. The lenders force their borrowers to pay off the loans in a very fallacious way. They tend to threaten the defaulters or sell their debts to debt collection agencies that result in a ruined credit history of the defaulters. And sometimes even their wages are also garnished.
- Lastly, because the bans have been effective in other states.