The lender agrees not to deposit the check until the consumer's next payday or up to 14 days. Payday loans are made by check cashing outlets, stand-alone payday lenders, and by a few banks in partnership with check cashing outlets. The fee, when translated into a percent of the check or loan equals triple-digit Annual Interest Rates. Exportation is done by a bank chartered in a deregulated state. The bank then claims the right to export its home state's lack of regulation all across the country regardless of whether their practices would be illegal in the borrower's home state.
States can prevent payday loans through small loan and usury laws.
Nineteen states and two territories currently have laws that limit interest rates for small loans. Congress should close the National Bank Exportation loophole and protect consumers. Federal legislation is needed to prevent the use of national bank and thrift charters to evade state small loan rate caps and usury laws. Federal law should be created to prohibit loans based on a personal check made by banks. States with no usury or interest rate caps should enact legislation to put limits on the cost of payday loans.