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court.41 Nonetheless, Indiana retains its P for title lending, as it has a rate cap on the books and is enforcing the cap within its borders.

Kentucky: In 2009, this state imposed new restrictions on payday lenders. If a payday lender is not licensed by Kentucky, any loans it makes in Kentucky are void, and it is not entitled to collect any monies from borrow- ers.42 In addition, if a lender violates any pro- vision of the payday law, the executive direc- tor of the Ofce of Financial Institutions may void the loan; the lender may only recover from the borrower any principal it has paid to him or her.43 A ten-year moratorium on the issuing of new payday loan licenses became effective on July 1, 2009.44 The state has also created a database to track payday loan trans- actions; however, the $1 per transaction fee for accessing the database may be passed along to the consumer, thereby increasing the allowable APR on a two-week $250 payday loan from 460% to 471%.45 Kentucky retains its F grade in the payday loan category.

Maryland: Although this state does not per- mit payday lending, in recent years online payday lenders have been making loans to Maryland residents by setting themselves up as credit services organizations and charging

41 Midwest Title Loans v. Ripley, 616 F. Supp. 2d 897 (S.D. Ind. 2009), aff’d sub nom., Midwest Title Loans v. Mills, 593 F.3d 660 (7th Cir. 2010). Ky. Rev. Stat. Ann. § 286.9-035(1) (West). Ky. Rev. Stat. Ann. § 286.9-035(2) (West). Ky. Rev. Stat. Ann. § 286.9-071 (West). Ky. Rev. Stat. Ann. §§ 286.9-140(1)–(2) (West). As of May 1,2010, the database appeared to be up and running. 42 43 44 45

10 5 Updated Small Dollar Loan Products

broker fees to connect borrowers with loans. The result has been loans with triple digit APRs due to the imposition of broker fees on top of interest.46 A bill to close this loophole passed both houses of the Maryland legisla- ture and was signed by the governor on May 4, 2010. This new law prohibits broker fees that, when added to the interest charged on a loan, exceed the applicable interest rate cap.47 It will be effective on October 1, 2010.48 Mary- land already rated a P in the payday loan cat- egory; the new law will make its prohibition more effective.

Minnesota: As of August 1, 2009, this state has applied its payday laws to Internet payday lenders who make loans to Minnesota resi- dents while the residents are present in that state.49 Additional reforms also became effec- tive at this time, such as prohibiting payday loan contracts from requiring that disputes between a lender and a borrower residing in Minnesota be resolved anywhere but in Minnesota.50 A rate cap was not among the reforms, however, so Minnesota still rates an F in the payday lending category.

New Hampshire: On January 1, 2009, New Hampshire imposed a 36% APR cap on

46 Eileen Ambrose, Payday Lenders Face Tougher Re- strictions, Baltimore Sun (Apr. 12, 2010), available at http://www.baltimoresun.com/business/money/ bs-bz-ambrose-payday-20100412,0,2759475.story.

47 H.B. 79, 2010 Gen. Assem. 427th Sess. (Md. 2010), http://mlis.state.md.us/2010rs/billle/hb0079.htm.

48 Eileen Ambrose, Payday Lenders Face Tougher Re- strictions, Baltimore Sun (Apr. 12, 2010), available at http://www.baltimoresun.com/business/money/ bs-bz-ambrose-payday-20100412,0,2759475.story.

49 50

Minn. Stat. § 47.601, subdiv. 5. Minn. Stat. § 47.601, subdiv. 2(a)(2).

NATIONAL CONSUMER LAW CENTER

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