Thursday, May 2, 2013

Cash Advance, Anyone?

Although there are many people who have discovered the benefits of getting a payday loan (also known as payday advance, instant cash loan, or cash advance) and payday lending is at an all-time high, there are still some people who are hesitant to try because of consumer protection concerns. These people associate loans with banks and big financial institutions and do not feel comfortable making transactions with smaller, fringe lenders. They are probably not aware that Australia's Consumer Credit Code already covers payday lenders, not just banks and big financial companies.

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At the minimum, private payday lending companies and merchants are now required to disclose the full details of the loan to consumers. This means that there are no hidden charges to contend with when it is time to sign the loan contract. Consumers can make more comprehensive comparisons among several lenders and make a truly informed decision on which lender to do business with. Lenders are also required to register their business. For the business owners, this helps establish the legitimacy and credibility of their operation and encourage confidence from customers. For consumers, this is a good way to differentiate a good lender from a bad one. Unscrupulous lenders will not be able to register and continue with their unfair lending practices for very long.

The full implementation of the Consumer Credit Code is different from one state to another. In New South Wales, for instance, there is a cap on the interest to be charged on payday loans. This includes not just the APR, but all other charges and fees, such as administration fees, as well. Other states do not have a cap. This difference in implementation is the result of state legislators' efforts to balance consumer needs with lenders' business needs. It is important to remember that, as with any business, lenders need to make a profit on their customers' transactions, too. Making the legislation fair to both sides is a challenge, but needs to be done to encourage short-term loan providers to follow the law and protect consumer interests at the same time.

Another way that the Code protects consumers is that it requires lenders to give borrowers an alternate payment schedule if and when their customers are unable to repay the loan on time or in full under the original loan agreement. With the Code, consumers will also have a basis for taking legal action against lenders with unfair lending practices. These include exorbitant interest rates and undisclosed hidden charges.

The Consumer Credit Code is a work in progress. The business of payday lending is constantly evolving, and it is the legislators' job to make sure that the law can keep up with the changes. This may include making more of its provisions apply on a national level, instead of just applicable in a particular state only. In its present form, however, there is really no reason to not to take advantage of the benefits of getting cash advances-it's a fast, convenient, and confidential loan service for everyone.

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