In California, it is wide-spread practice to take out a payday loan for an immediate cash assistance. It is easy, fast and a convenient way to have a loan for immediate cash use. Although the amount you can get from a payday loan is small and limited, many people are still using availing of the service due to its convenience.

What is a Payday Loan?

A payday loan is a short-term cash loan service given to employees who wish to loan for a small amount of cash payable within a short period. The maximum amount that can be taken from a payday loan California is $300. The amount borrowed is payable within 31 days and not beyond.

A payday loan can be availed through storefronts lender or online lending services.

California Laws Protect Borrowers

All lenders, both storefront and online must be licensed by the Department of Business Oversight if they are to do business in the state of California. The department’s website provides a list of verified lenders with the license.

All payday lenders are allowed to make only one loan to a person at any time which shall not exceed the amount of $300. They may also charge a maximum fee of only 15% of the check or the amount of the loan.

A lender cannot make a new loan for a borrower to pay off an existing loan. It is deemed illegal by the California law to entertain rollover charges on loans. On the same note, a lender cannot make the borrower a new loan if there is an outstanding payday loan even if the combined total of the balance will not exceed $300.

The lender could only charge a total of 15% non-sufficient fund fee if the check the borrower issued bounced due to insufficient funds. Additionally, a lender could not threaten a borrower the prosecution in a criminal court for insufficient funds if in case the check issued bounce.

It is also stated in the California law that payday loan lenders cannot charge borrowers additional fees for the request for an extension or payment plan for the loan. However, the lenders are not legally accountable if they decline the request for an extension. It is strongly recommended that the borrowers call their creditors and ask politely to waive charges or fees for late payments, ask for the possibility of the interest charges being reduced, and work out a repayment schedule with consideration with you if they can foresee a possibility of their expected money to be delayed.

The law requires the lender to provide the borrower a contract that is written in the language used by the borrower to negotiate the loan.

Borrowers are advised to contact the Department of Business Oversight if they need help, or they suspect any violation made by the lenders in conducting their businesses.