Payday lenders provide loans against a customer's next paycheck. The customer writes a post-dated check for the loan amount plus fees and interest in exchange for cash, and the lender cashes the check on the date the loan is due. Some states have outlawed payday loans because lenders charge high interest rates. Payday loans are legal in Louisiana although lenders must comply with limitations on the amount of interest and fees they can charge.
Payday lenders in Louisiana must not make loans for more than $350 at a time. They may charge interest of up to 16.75 percent or $45, whichever is smaller. If the debtor defaults on the debt (e.g., his post-dated check is returned for insufficient funds, and he does not reimburse the payday lender), the lender may charge interest of 36 percent on the unpaid balance during the first year and 18 percent of the unpaid balance in all subsequent years.
Louisiana payday lenders cannot roll over debt from one pay period to another. The debtor must repay the debt in full and take out another loan if he needs to do so. However, the debtor can pay 25 percent of the loan amount plus applicable fees by postdated check when he takes out the loan instead of paying the total and enter a new loan on the due date. For example, if the original loan plus fees was $122.50, the debtor can pay $30.63 and take out a new loan on the date the original loan is due.
No Notice Law
Louisiana law does not require lenders to post a notice informing customers of the terms of the loan, according to the Louisiana State University Law Review. Lenders may, however, post a notice if they wish, and they are encouraged to do so in a conspicuous location. Because the law does not require lenders to post a notice, some borrowers may not understand the terms of the loan. Borrowers should always ask for details about the loan terms before getting a payday loan.
Although Louisiana law does put some restrictions on payday loans, the LSU Law Review points out that the law primarily favors lenders. The wording of the law is often vague, and borrowers may not understand loan terms or realize that payday lenders charge far higher interest rates than most credit cards or traditional loans. Borrowers may want to avoid taking out more than one payday loan at a time to minimize interest charges.