Diana L. Taylor, Superintendent of Banks
One State Street, New York 10004
STATE OF NEW YORK
AVOIDING DANGEROUS OR ‘PREDATORY’ LOANS
A cash advance loan is a small, short-term, high-interest loan that is offered in anticipation of the receipt of a future lump sum of cash
or payment. Although a cash advance may be made in anticipation of future legal winnings, pensions, inheritances, insurance awards,
alimony or real estate proceeds, the most common cash advance loans are Payday Loans and Tax Refund Anticipation Loans.
Payday loans are illegal in New York State. A payday loan is a relatively small (usually under $500), high interest, short-term loan.
A borrower gives a lender a postdated personal check or authorization for automatic withdrawal from a bank account. In return,
the borrower gets cash, minus the lender's fees. The lender holds the check or electronic debit authorization for a week or two
(usually until the next payday). At that time, the borrower has the option of (1) paying back the loan and fee in exchange for the
original check, (2) letting the lender deposit the check, or (3) renewing or ‘rolling over’ the loan.
Some of the problems that can arise with a payday loan are:
• The loan term is short and is often not enough time to save the money needed to repay the loan in full.
If the loan cannot be paid back in full at the end of the term, it has to be renewed, extended, or more money has to
be borrowed to cover the first loan. Fees are charged for each transaction.
• The interest rates that are charged are very high – sometimes 400% or more.
If the lender deposits the check to repay the loan and there are insufficient funds in the borrower’s account, the
borrower is hit with even more fees for insufficient funds and still owes the amount of the loan to the lender.
If you feel that a payday loan is your only optio