Providers of short-term, delayed deposit loans will be required to provide more information to borrowers under a bill passed by lawmakers April 18.
To secure a delayed deposit loan—often called a payday loan—a borrower typically submits a personal check for the loan amount, which is then held and cashed by the lender at the end of the loan period, which typically is 34 days.
LB194, introduced by Omaha Sen. Tony Vargas, requires that a lender provide written notice to a borrower including the name of the borrower, transaction date and amount, payment due date and total payment due and the total fees imposed on the transaction, both as a dollar amount and an annual percentage rate.
The notice also will state that such loans should be used only to meet short-term cash needs, that the total cost of a transaction cannot exceed $500, that the borrower has the right to rescind a transaction before the end of the next business day and that the borrower has the right to rescind authorization for an electronic payment.
Any fees charged to individuals on active military duty or their spouses and dependents cannot exceed the amount allowed under federal law.
If a check held by a lender is returned unpaid due to insufficient funds, a closed account, a stop-payment order or other reason, the lender can exercise all civil means to collect the face value of the check. The lender can collect one returned check charge for each delayed deposit, not to exceed $15, plus court costs and attorney’s fees.
A borrower who is unable to pay back a loan when due can request an extended payment plan once in any 12-month period. The bill also requires lenders to accept prepayment of a loan from a borrower without any penalty.
Finally, lenders will be required to provide information annually to the state Director of Banking and Finance, who will submit a final report to the Legislature.
The bill passed on a 49-0 vote.