Express Loan America | Express Payday Loans Review

The Consumer Credit Code now includes lenders offering easy payday loans, but this is not the final step in regulating the payday lending industry. Further studies have revealed additional areas of concern. There are also issues on the effectiveness of current legislation.

Existing rules require lenders to disclose the terms and conditions of their credit products, with the objective of giving consumers enough information to be able compare products. Although there is evidence that lenders are complying with this rule, there is some doubt on its effectiveness in providing protection to borrowers, considering that the most vulnerable consumers are often desperate to get funds quickly and have limited financial literacy skills to understand loan terms.

Consumers cannot depend on the competition in this industry to keep prices and terms reasonable, either, because most consumers are poorly placed to shop around, too much in a hurry to get cash, limited internet access and there is not much choice when there are lenders who still manage to operate outside the bounds of the Code.

Borrowers are also empowered to challenge unjust contract and fees under the Credit Code. Again, it is argued that there is little or no evidence of a successful challenge to payday contracts under the Code, since these are often settled privately. Also, payday loan customers are people who are least likely to have the confidence or capacity to take legal action against their creditors, and the relatively small loan amount may not justify the costs of taking the case to court.

The jurisdiction of regulatory laws, which differ from one state to another, is also an issue. For instance, New South Wales has a cap of 48 percent on the annual percentage rate (APR) for short-term loans. With this, a lender cannot charge more than 48 percent APR on a loan that is filed in NSW, but can do so in other states with no similar law in place, and possibly make up for the difference by charging exorbitant rates for loans filed outside of NSW.

There is also a problem with payday lenders requiring direct debit authority from a borrower’s bank account to secure a loan application. This includes continuing to take money out of an account after the debt has been paid or debiting an incorrect amount. It is also possible that unscrupulous lenders will perform a withdrawal even when there are insufficient funds in an account, incurring a penalty for the consumers with their banks.

Some of the suggested changes for the Code include the imposition, at the national level, of a cap on the charges and fees, expressed as a yearly rate (similar to 48 percent cap on the APR in NSW), as well as the prohibiting of taking essential household goods as collateral—except when the purchase of said goods are financed by the loan. Other possible amendments are the requirement for lenders to allow the borrower to cancel direct debit authorities and challenge all types of fees and charges.  It is noted, however, that there are some key aspects, such as interest rate caps, where divergence in opinions by different states can make centralising legislation on so called fast payday loans difficult.