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5 Warnings about Pay Day Loans

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You need cash now. Should you write a check to a pay day lender to get instant access to that cash? A pay day loan usually happens like this: you write a check or authorize deferred direct deposit to the lender for the amount of cash you need, plus any finance charges and fees. The pay day lender holds that check or waits to access your checking account until your next pay day, when the loan and fees must be paid in full. If you are unable to pay the full amount of the loan and additional fees, you'll incur a finance charge and the loan will be rolled over to the next pay day.

Before you sign the contract for a pay day loan, here are five warnings to remember:

1) Make sure the institution has a valid registration with the Department of Financial Institutions. If it does not not, the person or business is violating the law. Utah Code 7-23-201. You can also contact the Department of Financial Institutions to make a complaint against a pay day lender. Use the form provided to mail or email your complaint.

2) There are no maximum interest rates in Utah. However, the interest rate should not be unconscionable. Utah Code 70C-7-106.

3) The maximum roll over loan period is 12 weeks. Utah Code 7-23-401.

4) The pay day loan contract must be in writing. Utah Code 7-23-401.

5) The pay day lender must post "a complete schedule of any interest or fees charged for a deferred deposit loan that states the interest and fess using dollar amounts." Utah Code 7-23-401.

For more information about pay day loans, including ways to find alternative sources of funding, check out the Federal Trade Commission's Consumer Alert: "Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives."

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