Please note that the Georgia Department of Banking and Finance does not regulate payday lenders. Over the last several years, what is commonly referred to as “payday” lending (or deferred presentment) has become a multibillion dollar industry. However, payday lending in its most common form is illegal in Georgia.
Payday lending is the practice of using a post-dated check or electronic checking account information as collateral for a short-term loan. A typical payday loan involves the taking of a check and holding it for a few days or weeks (until “payday”), then depositing it or requiring repayment of the loan of $100 to $500 plus a fee or interest. To qualify, borrowers need only personal identification, a checking account, and income from a job or government benefits - like Social Security or disability payments. If the borrower's check is not covered when the payday loan comes due, the borrower accumulates bounced check fees from the bank and the lender, who can pass the check through the borrower’s account repeatedly. Payday lenders have used aggressive collection practices, sometimes threatening criminal charges for writing a bad check even when state law prohibits making such a threat. Under these pressures, most payday borrowers get caught in the debt trap.
The federal Truth in Lending Act requires disclosure of the cost of credit. You must receive, in writing, the finance charge (a dollar amount) and the APR, which is the cost of credit on a yearly basis. Payday lenders are subject to this regulation.
Small loans of less than $3,000 are regulated by the Georgia Industrial Loan Act. This Act provides that persons or companies making loans and charging interest thereon at a rate of more than 8 percent (simple interest per annum) shall be subject to the Georgia Industrial Loan Act (“GILA”) and shall be required to obtain a license from the Office of the Commissioner of Insurance unless they are exempt from such licensure.
In 2004, the Georgia General Assembly passed some new provisions under the GILA to increase the fines and criminal penalties for people making small loans at illegal rates of interest. The law went into effect in May 2004, and though it is under review in the federal courts, it is currently in effect. Referred to as the Payday Lending Act of 2004, this law authorizes felony and racketeering charges against violators, as well as fines of up to $25,000 per violation and a possible jail sentence of 25 years.
The Georgia Department of Banking and Finance does not handle complaints relating to payday lenders. If you are the victim of a payday lender, contact your county district attorney and notify the Office of the Commissioner of Insurance, Industrial Loan Division (404-656-2078).
If you believe that a lender has violated the Truth in Lending Act, file a complaint with the Federal Trade Commission (FTC). The FTC cannot solve individual problems but will be able to act if it discovers a pattern of violations.
There are ways to avoid needing a payday loan:
- Compare offers when shopping for credit and look for credit with a low APR and low finance charges.
- Ask creditors for more time to pay your bills, and inquire whether they will charge you more fees for that service.
- Make a realistic budget and figure your monthly and daily expenditures to eliminate unnecessary purchases.
- Look into the availability of overdraft protection on your checking account.
- Contact your local consumer credit counseling service, credit union, or nonprofit credit counseling provider if you need help planning a budget.
- Plan on using only one credit card for purchases so you can limit your debt and track your expenses.