The loan that is payday model is clearly even more complicated than we ever realized

Enter the 3rd Party

It’s not merely one company lending its cash to a client for people high rates of interest and costs. In reality, that model is actually unlawful in lots of states (including my house state of Texas) due to usury laws and regulations, which prohibit signature loans from having usuriously high interest levels (in Texas, the limit is 10%).

Pay day loans are signature loans, therefore payday lenders got around these laws and regulations by acting as being a agents or middlemen between loan providers and clients. Here’s an example. Say a payday financial institution would like to provide out $100,000. They can’t take action straight because they’ll violate those usury regulations. Continue reading