People in financial difficulty often turn to bad solutions because their options are limited. Bad credit ratings often lead them to predatory lenders that take advantage of them and, in most cases, make a bad situation worse. But are they legal in New Jersey? No, they are not, and there are two reasons for this.
Why They Aren't Legal
First, the interest rates they charge violate New Jersey's usury laws . New Jersey has an interest rate cap of 30%, and the lowest rate offered by these lenders is often well in excess of this. In fact, they are usually over 400% when expressed as an APR!
Second, New Jersey banking laws prohibit anyone from cashing or advancing any money on a postdated check. This is because these are short-term cash loans based on the borrower's personal check held for future deposit or on electronic access to the borrower's bank account.
Borrowers will write a check for the amount borrowed, plus the finance charge, and receive cash in return.Therefore, in essence, the company is lending money (cash) in return for a post-dated check.
What Should I Do?
Taking out a pay day loan is often a sign of severe, long term financial difficulty. You need to take a hard look at where you are financially and whether there is a practical way out. Perhaps you should be thinking about bankruptcy, and download my free book, Am I In Too Deep? A Guide to Knowing When You Need to File Bankruptcy in New Jersey to help you make that decision.
If you live in Southern New Jersey, are in severe financial distress, and are thinking about filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss the best way to handle your situation.