Payday advance loan oklahoma

OK passes payday loan bill

The authors of a new law say it will enable customers who obtain short-term 'payday loans' to have more repayment options, better safeguards, and the opportunity to receive lender-funded credit counseling.

Senate Bill 1565 by Rep. Bill Nations and Sen. Angela Monson became law immediately with the governor's signature.

Payday advance loans, or deferred deposit loans, are short-term loans of relatively small amounts.

A 2002 report by the National Conference of State Legislatures estimates the payday lending industry produces $2.4 billion in fees from 65 million transactions each year.

Payday loans are available in Oklahoma through lenders partnered with federally chartered financial institutions. The lenders maintain that they provide a necessary service not met by traditional lenders.

Nations, D-Norman, said the loans are often a better alternative for customers who have an unexpected expense or a temporary reduction of income than paying expensive late charges on credit cards or returned check fees.

Used as intended, payday advances can help working citizens cover a temporary shortfall, said Monson, D-Oklahoma City.

However, consumer advocates have expressed concern that the short- term loans may trap borrowers in perpetual debt.

SB 1565 implements protections that Nations said will help prevent borrowers from falling into a cycle of debt. Under the measure, serial borrowers will be given the choice to repay their loan in four equal installments after taking out three consecutive loans. SB 1565 defines a consecutive loan as one made within seven days of the previous deferred deposit loan.

Customers who opt for the installment plan must agree not to enter any additional deferred deposit loans during the term of the repayment and for an additional 15 days after the payment plan ends.

SB 1565 also establishes a five-cent fee to be paid by lenders for each deferred deposit loan processed. The nickel fee will be used to provide voluntary consumer credit counseling and education specifically designed for consumers utilizing deferred deposit loans.

SB 1565 authorizes lenders to charge borrowers for the cost of verifying a customer's credit through a database. Existing law requires the lender to deny a payday loan to an applicant who has more than one outstanding deferred deposit loan.

Nations said the legislation puts Oklahoma ahead of the curve in offering consumers options, while protecting borrowers. He called it the most comprehensive regulation in America and said it is used as a model for other states.