Written by attorney Robert Franklin Dean

Payday Loans in Maryland

A payday loan is a small, short-term loan often due within two weeks (on the borrower’s payday). They are notorious for high interest rates and they are banned in many states. According to Harpers Magazine, it is a $40 billion industry and there were over 22,000 payday lending stores in the U.S. in 2009.

If a borrower defaults on a payday loan, the lender can make phone calls, send letters, file suit and garnish wages and bank accounts like any other creditor.

Payday loans are known as a trap – if a borrower can’t pay the loan when it’s due, he can extend it to his next payday by paying a finance charge. Many borrowers pay the finance charge every two weeks without even starting to repay the principal.

For instance, a borrower may take out a $300 loan from a payday loan provider, agreeing to repay $330 in two weeks. When the loan comes due, he or she may not be able to pay in full, but he can pay $30 to get a two week extension. This process can continue indefinitely.

Despite what the Wikipedia article on “Payday loans in the United States" currently says, payday loans are not illegal in Maryland. It is only illegal to try to collect on loans with APR interest rates over 33%. and

Payday loans are regulated by theOffice of the Commissioner of Financial Regulation:

Here are some of the applicable regulations. If you believe that your lender is breaking the law, you should contact the DLLR.

If the borrower defaults by failing to pay, payday loans are collected like any other debt, under federal and Maryland law. The debtor will receive phone calls, threatening letters, and then a summons and judgment and post-judgment garnishments.

Payday loans are normally dischargeable in bankruptcy like other unsecured loans.

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