A Philadelphia payday loan company has been accused of violating Pennsylvania’s interest rate statutes. In legal terms, the interest rate statute is called an usury statute. Basically, usury is the concept of charging an interest rate that is higher than is legal.
In this situation, the payday loan company is using an internet bank based in Delaware and owned by the same people who own the loan company to back the loans. Thus, they are not bound by Pennsylvania law. The effective rate of interest on these loans is 400 to 500 percent, according to the attorney for the plaintiff.
Why is this a problem? Most people who get payday loans do not understand the rates that they are being charged. They do not understand that there are other ways to get money with lower interest rates. Payday loan customers are making decisions because money is tight. That is a bad time to borrow money.
I will keep you updated on this and other cases like this. In the meantime, if you need a loan look for a regular lending company such as a bank or Beneficial.