Jun 10, 2013 Philip Burgess
Short term lenders often help consumers finance major purchases, as well as make ends meet. Despite the convenient nature of these loan providers, some run into compliance issues due to complicated laws and regulations.
Recently in Illinois, several lending firms were penalized for failure to follow state policies, according to The News-Gazette. One company was fined over $14,000 for various violations that resulted from negligence.
Providing short term loans that exceeded for than 22.5 percent of borrowers' monthly income was one of the most common missteps cited by the source. Most of these mistakes resulted from erroneous calculations on the part of employees.
This highlights just how important it is for lenders to make sure loan officers are properly trained and fully understand lending regulations at state and federal levels. Particularly with short term loans, laws differ greatly by state.
For example, the National Conference of State Legislatures says Illinois regulations cap short term loan terms to a maximum of 120 days. However, California allows for just a 31 day window for payment structuring.
Complying with the law is pivotal for lenders. Companies that fail to do so can expect swift monetary and legal penalties.