Massachusetts is one of the 13 states in the union that currently prohibits the practice of payday lending within the state. According to the state’s Business Affairs and Regulation Office, loans generally referred to as a "payday loan" are illegal due to the high annual percentage rate charged. Statutory licensing provisions require entities that wish to engage in such small-dollar lending in Massachusetts to obtain a small-loan license from the Division of Banks.
The website added The Division of Banks (Division) requires that any business engaged in making loans in the amount of $6,000 or less at an interest rate greater than 12% obtain a small loan company license under Massachusetts General Laws. The small loan maximum annual rate of interest is currently capped at 23% with an annual administrative fee of $20.
Simply put, payday loans are known for high interest rates and relatively easy application requirements. To apply for a short term loan in states where they are legal, a potential borrower only needs to be over the age of 18, be a U.S. citizen, and have access to a bank account. Payday loans do not require any collateral from the borrower to apply, and the borrower’s credit history and debt level do not come into play during the application process.
The payback period for a cash advance loan is also short, usually about two weeks, which coincides with the standard two-week pay period used by most employers. When properly used, a payday loan allows a borrower to address unexpected financial troubles. But when used irresponsibly, it can lead to a debt cycle of further loans. The loans generally allow a borrower to apply for a relatively small amount of money, which can be anywhere from $100 to $1,000 depending on the state, and do not carry any spending restrictions. That is, a borrower does not have to declare what the loan is for, freeing them to use it as they see fit.
In June 26, 2006, the Massachusetts Division of Banks clarified its regulatory authority relative to internet-based payday lenders and licensure. The opinion, as listed on the Division’s website, makes clear that a payday loan transaction takes place where the consumer physically applies for the loan, not where the payday lender is physically located. Therefore, a payday lender doing business with Massachusetts consumers is prohibited from doing business without a license.
It is important to note, however, the decision does not prohibit a Massachusetts resident from searching for loans using online resources. The process operates much the same way the credit card companies operate. For example, a person living in Massachusetts can receive a credit card application from a bank in Delaware. In the same way, current Massachusetts laws do not prohibit a potential borrower from looking for lenders that operate out of the state.
A borrower should keep in mind, however, that applying for any loan does not guarantee approval and, regardless of approval status, a potential borrower should also understand the loan terms before agreeing to accept the funds.
Lenders in the state of Massachusetts are legally required to comply by the following limitations according to Small loan act applies. Mass. Gen. Laws Ann. ch. 140 §§ 96 et seq.; 209 Mass. Code Regs. 26.01. Check cashers are specifically prohibited from making loans unless licensed under the small loan act. 209 Mass. Code Regs. 45:14(8).:
If you have a complaint against a Massachusetts Cash Advance location you can contact your state regulator below:
Below you can find Massachusetts check cashers in the following cities:
The following information is key demographic data for the state of Massachusetts from the Census bureau.
Short-term loans work best when the borrower has a plan before applying: a plan on where to apply, a plan for the amount needed, and a plan on how to pay the funds back quickly. Due to the randomness of financial situations, it might be tempting to throw caution to the wind and accept the terms offered by the first lender that approves a borrower for a loan.
In those cases, Massachusetts residents may be at an advantage over states that allow payday lender operations. Due to the seemingly limited options, a borrower may be forced to spend more time understanding how a loan works and be allotted the opportunity to pick the best loan they can find. As short-term loans should never be used for long-term financial planning or anything other than an emergency situation, this should further strength the resolve of a borrower to plan ahead.
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