Author: Better Business Bureau
Published: 3/16/2008
Category: Finance
According to the Federal Trade Commission (FTC), check cashers, finance companies, and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, car title loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.
With payday loans, a consumer writes a check payable to the lender for the amount he or she wishes to borrow, plus a fee. The lender gives the borrower the amount of the check minus the fee. The lender holds the check until the borrower's next payday, when he or she can do one of three things: allow the check to be cashed, redeem it by paying cash to recover the loan plus a fee, or roll it over by paying the fee to extend the loan for two or more weeks.
With car title loans, companies offer short-term loans in exchange for the borrower's car title. In this situation, the consumer may find that if he or she is unable to pay the loan back when it comes due, the car becomes the property of the loan company. The car is often sold before the consumer can accumulate the funds necessary to get the title back.
Legislation enacted by the 2002 Virginia General Assembly authorizes payday lenders to transact business in Virginia. The legislation became effective July 1, 2002.
At the same time, the SCC approved regulations for payday lending in Virginia. The rules establish certain requirements and consumer protections applicable to licensed payday lenders and the loans they make payable on the borrower's next payday.
Interesting facts
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In finance, unsecured debt refers to any type of debt or general obligation that is not collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.
In the event of the bankruptcy of the borrower, the unsecured creditors will have a general claim on the assets...
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