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4. One-year, $1,000 unsecured installment loan

The Scorecard uses an unsecured installment loan with a longer duration to provide another point of comparison to the payday and auto- title loan products. The structure of this loan is similar to the six-month, $500 unsecured installment loan.

5. Criminal usury cap

The Scorecard assesses whether a state main- tains a criminal usury cap. Criminal usury caps can provide an outer limit to allowable interest rates. Three states have criminal usury laws that apply regardless of other state law and set maximum rates. Twenty-eight jurisdic- tions have not enacted a criminal usury law. Twelve states set a cap in their criminal law that does not apply if other state law allows a higher rate. Five states have a general crimi- nal usury law that makes it a crime to violate the usury caps in other state law but does not itself set a rate limit. Finally, three states make exceeding the criminal usury cap a crime only if the lender also threatens or uses violence; however, in one of these states, there is no crimi- nal liability based on the rate cap violation if the rate charged is otherwise authorized by law.

III. GRADING SCALE30

The four small loan products are graded on a pass (P) or fail (F) basis based on the APR for the loan product.31

30 Grading is strict, thus some states—including Mas- sachusetts, Minnesota, North Carolina, and West Vir- ginia—earn Fs for products that are not far over the 36% APR benchmark. In general, these near misses are the result of fees being permitted in addition to interest.

31 APRs are rounded down or up to avoid decimals.

NATIONAL CONSUMER LAW CENTER

  • If the loan product’s APR is less than or equal to 36%, the grade is a P;

  • If the state “Prohibited” a payday or auto-title product, the grade is a P;32

  • If the loan product’s APR is greater than 36%, the grade is an F;

  • If there is “No cap” on the loan prod- uct’s APR, the grade is an F.

Criminal usury statutes are somewhat more complicated because of their interplay with other state laws. A handful of these laws set an absolute cap that applies to all loan products evaluated in this Scorecard. For these laws, the same basic grading rule applies as for the individual small loan products.

  • If the criminal usury statute imposes an APR cap less than or equal to 36%, the grade is a P;

  • If the criminal usury statute imposes an APR cap greater than 36%, the grade is an F.

Other criminal usury statutes set a rate cap, but the cap is inapplicable if another state law allows a higher interest rate. For example, a state criminal usury statute might cap interest

They were rounded down to the nearest number without decimals if they were XX.50% or less and were rounded up to nearest full number without deci- mals if they were XX.51% or more.

32 Where a payday or auto-title loan is “Prohibited,” this means that either: a) state law bans payday or title lending because it prohibits the taking of the check or the car’s title as security; or b) payday or title lenders would not make loans with APRs under the applicable usury cap due to their current business models. For example, the applicable state law may contain a low rate cap and/or the small loan law re- quires installment payments.

Updated Small Dollar Loan Products 5 7

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