During our unofficial audit of the cash advance statutes for U.S. states, we noticed some laws and statistics that were different from the rest. Some are outlandish. Some seem inspired. Others are just strange. We wanted to call attention to all of them. Here are the top ten states with interesting cash advance regulations.
Texas has more cash advance codes than any other state, but none of them actually do anything. Almost every state is able to confine their cash advance laws into one single statutory citation. It’s rare for the laws to take up more than one code. For some reason, though, Texas has six different codes that discuss cash advances. Now, you might think with all these regulations, a cash advance would be pretty cheap in Texas, right? Guess again – borrowers in Texas pay some of the highest cash advance prices in the country. So what good are all those laws?
Mississippi is the poorest state in the country. It also has the most cash advance lenders per capita. There might be a correlation between a state’s poverty level and its amount of cash advance lenders. At least there’s somewhere these people can get money.
For some reason, South Carolina lets you take out as many simultaneous cash advances as you want. Most states limit the number of outstanding cash advances you can have at one time. Some states even impose a “cool-off period,” which is the time you have to wait between cash advances. Some states, like South Carolina, let you take out multiple cash advances.
Colorado has a six-month minimum loan term. Most states have a maximum loan term, which means the lender isn’t allowed to set your loan term for longer than so many days. In Colorado, though, there is no maximum loan term. Instead, there’s an absurdly long minimum loan term of six months. Does this benefit the borrower? Well, in 2009, before this law went into effect, the Colorado Attorney General’s Office reported that over 60-percent of all Colorado cash advances were “refinance-type” transactions, which meant that over 60-percent of borrowers were either extending their loan or taking out a new loan to help pay off their last one. In 2012, after the new six month limit was put in place, there wasn’t a single loan that was extended. This is according to research from the Pew Charitable Trusts, who also looked at how much people saved in 2012 under the new laws – over $40 million.
Utah pretty much lets lenders do whatever they want. In Utah, there is no limit on the loan amount, finance charge, simultaneous outstanding loans, rollovers, or collection fees.
Louisiana borrowers who can’t pay back their loans have the right to request an installment payment plan. The lender is not allowed to charge an extra fee for this installment plan. If your lender lets you, you can instead enter into a new loan for the money you owe. You just have to pay off 25-percent of your old loan (with the fees) first. Both options have their merits.
Nevada cash advance lenders are required to show potential borrowers what their APR will be. They are also supposed to explain to you that a cash advance should only be used as a short-term financial solution.
Rhode Island arguably has the most reasonable cash advance laws. Too many states make one of three cash advance mistakes: 1) they outlaw cash advances; 2) they set the APR at a ridiculously low 36-percent; or 3) they don’t restrict cash advances at all. Rhode Island seems to have found a good middle-ground, and other states should take note. In Rhode Island, the maximum finance charge is set at 10-percent of how much you borrow. You’ll still be looking at an APR in the triple digits, but it’ll be much lower than other states where the fees can be much higher.
For some reason, Oregon has a maximum loan amount of $50,000. Traditionally, a cash advance is supposed to be an advance on your next paycheck. I don’t know too many people who make $50,000 on every paycheck and also need a cash advance.
In Michigan, lenders have to check a state-maintained electronic database to see if you have any other outstanding cash advance loans. The lender can charge you $0.45 for running the database check. You are allowed to have up to one other loan, as long as it’s with a different lender. It’s impossible for a group of legislators to come up with a law that’s going to satisfy everyone. At least every now and then the laws are fun to look at.