Know the regulations around payday loansUncategorized
More easily accessible than other credits, the payday loan is a method of financing which is nonetheless regulated. In order to protect his interests and defend his rights, but also so as not to default on his obligations, it is better for the borrower to be fully informed before signing such a consumer credit contract. To this end, Best Bank offers you to make a complete review of the regulations surrounding payday loans. http://fastpaths.com/home/ for a critique
Payday loan regulation: what objective?
Like consumer credit, payday loans are governed by a very specific code: the Consumer Code. Introduced in the 1990s and recorded in 2016, the Consumer Code contains a whole series of articles of law whose primary purpose is to protect the borrower. Protect it from what exactly? Any abuse of weakness on the part of the lender. Thanks to the Consumer Code, the relationship between the two parties is balanced.
Among other things, the Consumer Code deals with:
- Rules to be applied by the lender in terms of information to the borrower;
- Terms of application of the loan contract;
- Settlement of disputes (mediation, legal action, sanctions, etc.);
- Treatment of over-indebtedness situations.
Over-indebtedness, let’s talk about it! payday loan regulations aim precisely to prevent the borrower from finding himself in such a situation. This could be the case if he borrowed an amount to which a very high rate would apply. The interest would be disproportionate and the borrower would repay monthly payments that are too large in relation to his income. Among the measures aimed at preventing over-indebtedness:
- The setting of a rate of wear (that is to say the maximum rate applicable);
- Strengthening consumer information (notably through offers);
- The obligation for the lender to check the creditworthiness of the borrower.
What actually allows me to measure risks?
The payday loan regulations are strict and oblige the lender to mention on his offer, in particular:
- The type of credit;
- The amount of the credit;
- The total amount due;
- The arrangements for making the borrowed amount available;
- Repayment terms;
- The duration of the contract ;
- The APR (annual effective annual rate);
- The articles of the Consumer Code relating to the period of validity of the offer and the minimum reflection period;
- The right for the borrower to obtain a copy of the credit contract offer;
- The existence of a withdrawal period.
Good to know: the withdrawal period for payday loans
As with all consumer loans, the borrower has a withdrawal period of 14 calendar days after signing a payday loan contract offer.
As a reminder, the APR allows the total amount of the credit to be represented. It includes all costs relating to it, such as the nominal rate, administration fees or insurance.
Precisely, insurance, do I have to take out one?
Let’s be clear: taking out insurance to cover your credit is not an obligation for the borrower according to the regulations on payday loans. However, there are few banks and credit organizations that provide unsecured financing!
If the borrower has no life insurance or other security to pledge, chances are the lender will demand that he take out insurance.
Otherwise, he will be refused his payday loan request. The good news is that the borrower is free to accept the lender’s insurance contract offer or to choose one himself if it is cheaper. The guarantees must be equivalent.
Is payday loan regulation enough to protect me as a borrower?
Both yes and no
Yes, because as mentioned, the lender is bound by a certain number of obligations aimed in particular at limiting the risks of over-indebtedness.
No, since despite this regulation, the borrower remains the sole decision-maker and incurs his own responsibility.
In fact, it is always important to take the time to reflect and use this period to compare offers. Why? Because even if the borrowing conditions remain legal, it should be borne in mind that they vary enormously from one financing institution to another. The borrower must, in particular, take into account:
- The rate (APR);
- repayment terms;
- The repayment tenure.
We must not lose sight of the “pitfalls” of credit offers: variable rate, additional fees … all, mentioned with discretion. To avoid them, the borrower should take the time to examine everything in detail.