Payday Lenders such as Payday Loan Trust, will have to wait until November in order to see if their right to offer payday loans to the citizens of Montana will become “regulated out of business”, some lenders argue.  The term “payday loan” describes a short-term loan, between the range of $100-$1,500 (averaging about $300), that is typically set to be re-paid on the borrower’s next paycheck date.  These loans are, in majority, utilized by middle class Americans that find themselves in a temporary financial pinch until their next payday and cannot find access to short-term credit anywhere else.  But come this November residents of Montana may see their right to choose payday loans eliminated if initiative I-164 is passed, which would eliminate hundreds of jobs in Montana when lenders such as Pay1Day stop offering cash advance loans in Montana.

The initiative will cap the maximum allowable APR to a mere 36%, meaning lenders could only charge $1.38 for each $100 loaned for a 2-week period.  And because the majority of payday loan borrowers have bad credit, they are a higher risk meaning that after licensing, operations costs and customer defaults, the 36% APR would not come close to covering expenses.

Legislative movement such as I-164 in Montana has many in the payday loan keeping a close eye on payday loan news developments, not only in Montana but across the entire country.  Even for direct online lenders such as Pay1Day, who loan directly to borrowers via their secure online applications, there are strict penalties for lending to borrowers that reside in States that have banned these loans or placed harsh APR’s restrictions.  Staying one step ahead of these changes is crucial in a fast changing industry such as payday lending.

Unfortunately for thousands of Americans this government “over” regulation and elimination of consumer choice has done little to better the average payday loan customer’s financial situation, as well as eliminated thousands of jobs.  Any legitimate complaints against the payday lending industry could easily be resolved with just minor regulations, such as limiting or eliminating “rollovers” of loans, which can make it tougher to pay off the loan principle.  Instead, consumers are left with literally no other option for credit, and turn to un-regulated and often times unscrupulous online lenders.

Unlike reputable and responsible direct lenders, these “other” sites are the source of the vast majority of complaints against the payday lending industry.  Typically they are not even lenders, and simply “sell” your personal application info off to lenders, making it nearly impossible to contact a representative if perhaps you never receive your money yet still are charged an “auto payment” for re-payment of a loan you never actually received.

We as consumers and lenders can only hope that this Montana initiative will be voted down, to save jobs and protect the consumer’s right to choose.  After all, payday loans are already fully regulated, and every detail is disclosed.  I wish I could say that for every other financial product.