GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST.” The ads are on the radio, television, the Internet, even in the mail. They refer to cash advance loans or a payday loan – which come at a very high price.
Check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.
Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee. The company gives the borrower the amount of the check minus the fee. Fees charged for cash advance loans or a payday loan are usually a percentage of the face value of the check or a fee charged per amount borrowed – say, for every $50 or $100 loaned. If you extend or “roll-over” the loan – say for another two weeks – you will pay the fees for each extension.
Under the Truth in Lending Act, the cost of payday loans – like other types of credit – must be disclosed. Among other information, you must receive, in writing, the finance charge (a dollar...
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