North Carolina has laws established to protect consumers from unfair and outrageously high interest charges. These laws are called usury laws and they are intended to keep consumers from being required to pay more than ten percent annual interest on any type of loan. So why do payday loans charge consumers sometimes triple digit interest plus fees?
The reason consumers seeking payday loans North Carolina cannot get short term financing at 10% APR is because the state has dozens of exemptions and loopholes in the laws. In most cases the usury laws are worthless. Most banking and financial institutions have special exemptions, as well as just about every type of business that lends money or collects interest for anything. For the most part, North Carolina’s usury laws are only in place to keep one individual from charging another the same amount of interest that a bank would charge them. Even pawnbrokers have special exemptions to the state’s usury laws.
The reason the state has so many different usury law exemptions and rules in the first place is because it is easier to write new laws than it is to change the state’s Constitution. But this practice has caused more problems than it would have been to just change the Constitution.
The state’s Constitution is clear when it states what interest rate limits are allowed to be charged in the state. All loans made to private individuals are not to exceed ten percent interest per year and loans to companies are to be 10% or 5% over the Federal Reserve Bank of San Francisco’s discount rate.
Payday loans are usually quite higher than that. Most payday loans in North Carolina have fees and interest charges that equal fifteen percent of the amount borrowed. The problem is that these loans are only for one month. Fifteen percent interest to borrow money for a month sounds like highway robbery. If a bank made money like that people would riot in the streets, but no one seems to care that the people who can afford these charges the least are required to pay.
Payday loans are not fair no matter how you look at it. People seeking emergency funds should have better options available to them. Several states have tried to put a stop to the practice of payday loans and it might be time for North Carolina to do the same.
If someone needs fast money to make ends meet there are batter options, especially if they have good credit. Those looking for better options should take the time to find better options available to them, at least until North Carolina follows other states and does something to fix this problem.