Idaho's Payday Loan Act, designed to dictate how much payday lenders can give borrowers, went into effect Tuesday.

Payday lenders in the state must now restrict the amount of any short-term loan to 25% of a borrower's gross monthly income. They cannot exceed a total loan amount of $1,000.

Several lawmakers found the scope of that language troublesome when the state's House of Representative approved the bill, 35-34, in March. Rep. Phylis King, D-Boise, said the 25% figure is still far too much. She pushed for an amount closer to 5%. Other lawmakers expressed concerns that people seeking loans could circumvent the parameters by visiting several payday lenders in one day.

According to the Idaho Department of Finance, the state's licensed payday lenders made 446,704 loans to Idaho borrowers in the total amount of nearly $169.5 million.

Other consumer protections outlined in the Payday Loan Act include:
•    Payday lenders are required to provide an extended payment plan for borrowers who experience difficulties paying off their loans. An extended payment plan allows borrowers to repay a payday loan over a 60-day period in four equal installments. Borrowers may request an extended payment plan only once per 12-month period.
•    Payday lenders are limited in the number of times they may present a borrower's check for payment. A payday lender may only make one initial presentment of a check and two subsequent re-presentments if the check remains unpaid.
•    The law's new amendments enhance existing consumer protection disclosures and require all such disclosures to be in 12-point bold and capitalized type.

Nationally, banks have started to rid themselves of ties to industries that regulators deem unsavory, from pornography to gun sales to payday loans. But it may not be enough to fully cleanse banks of legal liabilities.

Several recent judicial rulings suggest that banks' next worry may stem from a potentially costly group of related lawsuits filed on behalf of consumers. These plaintiffs make a core argument that should send a chill down many bank executives' spines: the banks should have known that their payday-lender customers were doing illegal things and thus were helping them break the law.


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