Payday Loan in Indiana
Legal Status: Legal
Citation:
Ind. Code Ann. ยง 24-4-4.5-7-101 et seq.
Loan Terms:
Maximum Loan Amount: $550 (not to exceed 20% of borrower’s monthly gross income)
Loan Term: Min: 14 days
Maximum Finance Rate and Fees: 15%: $0-$250; 13%: $251-$400; 10%: $401-$500
Finance Charge for 14-day $100 loan: $15
APR for 14-day $100 loan: 390%
Debt Limits:
Maximum Number of Outstanding Loans at One Time: One per lender; Two total
Rollovers Permitted: None (cannot renew, repay, refinance or consolidate)
Cooling-off Period: 7 days after 6 consecutive loans
Repayment Plan: After 3 consecutive loans, lender must offer an extended payment plan of at least four equal installments at no additional cost
Collection Limits:
Collection Fees: One $20 NSF fee; additional charges may apply when check or authorization to debit was used to defraud another
Criminal Action: Prohibited
Where to Complain, Get Information:
Regulator: Indiana Department of Financial Institutions
Address: 30 South Meridian Street, Suite 300 Indianapolis IN 46204
Phone: (800) 382-4880
Applicability: This Chapter governs small loans defined as deferred deposit transactions and applies to: all persons licensed to make loans; to any person who facilitates, enables, or acts as a conduit for any lender who is or may be exempt from licensing; a bank, savings association, credit union, or other state or federally regulated financial institution except those that are specifically exempt regarding limitations on interest rates and fees; or a person, if the department determines that a transaction is: in substance a disguised loan; or the application of subterfuge for the purpose of avoiding this chapter.
Licensing requirements: A person engaged in making small loans under this chapter shall post a bond the amount of $50,000 for each location where small loans will be made, up to a maximum bond of $500,000.
Loan terms: A small loan must have a principal of at least $50 and not more than $500 and must have a term of at least 14 days. The total payable amount of the small loan cannot exceed 15% of the borrower’s monthly gross income. After the borrower’s fifth consecutive small loan, another small loan may not be made to that borrower within 7 days after the due date of the fifth consecutive small loan. After the borrower’s fifth consecutive small loan, the balance must be paid in full. However, the borrower and lender may agree to enter into a simple interest loan, payable in installments, within 7 days after the due date of the fifth consecutive small loan.
Permitted fees: Finance charges on the first two hundred fifty dollars ($250) of a small loan are limited to fifteen percent (15%) of the principal. Finance charges on the amount of a small loan greater than two hundred fifty dollars ($250) and less than or equal to four hundred dollars ($400) are limited to thirteen percent (13%) of the amount over two hundred fifty dollars ($250) and less than or equal to four hundred dollars ($400). Finance charges on the amount of the small loan greater than four hundred dollars ($400) and less than or equal to five hundred dollars ($500) are limited to ten percent (10%) of the amount over four hundred dollars ($400) and less than or equal to five hundred dollars ($500). The only fee that may be contracted for and received by the lender on a small loan is an NSF charge, not to exceed $20, for each return by a bank or other depository institution. This additional charge may be assessed once regardless of how many times a check or an authorization to debit the borrower’s account may be submitted by the lender and dishonored.
Disclosure requirements: The lender shall disclose to the borrower to whom credit is extended with respect to a small loan the information required by the Federal Consumer Credit Protection Act and must conspicuously display in bold type a notice to the public both in the lending area of each business location and in the loan documents the following statement: “WARNING: A small loan is not intended to meet long term financial needs. A small loan should be used only to meet short term cash needs. The cost of your small loan may be higher than loans offered by other lending institutions. Small loans are regulated by the State of Indiana Department of Financial Institutions. A borrower may rescind a small loan without cost not later than the end of the business day immediately following the day on which the small loan was made. To rescind a small loan, a borrower must inform the lender that the borrower wants to rescind the small loan, and the borrower must return the cash amount of the principal of the small loan to the lender.” When a borrower enters into a small loan, the lender shall provide the borrower with a pamphlet approved by the department that describes the availability of debt management and credit counseling services; and the borrower’s rights and responsibilities in the transaction. The lender shall provide to each borrower a copy of the required loan documents before disbursement of loan proceeds.
Prohibited acts: A small loan may not be secured by personal property other than a check or electronic debit. No lender may permit a person to become obligated under more than 1 loan agreement with the lender at any time. A lender shall not make a small loan that, when combined with another outstanding small loan owed to another lender, exceeds a total of $500 when the face amounts of the checks written or debits authorized in connection with each loan are combined into a single sum. A lender shall not make a small loan to a borrower who has 2 or more small loans outstanding, regardless of the total value of the small loans. Other prohibited acts: threatening to use or using the criminal process in any state to collect on a small loan; threatening to take action against a borrower that is prohibited by this chapter; making a misleading or deceptive statement regarding a small loan or a consequence of taking a small loan; contracting for and collecting attorney’s fees on small loans made under this chapter; altering the date or any other information on a check or an authorization to debit the borrower’s account held as security; using a device or agreement that the department determines would have the effect of charging or collecting more fees, charges, or interest than allowed by this chapter, including, but not limited to: entering a different type of transaction with the borrower; entering into a sales/leaseback arrangement; catalog sales; entering into transactions in which a customer receives a purported cash rebate that is advanced by someone offering Internet content services, or some other product or service, when the cash rebate does not represent a discount or an adjustment of the purchase price for the product or service; or entering any other transaction with the borrower that is designed to evade the applicability of this chapter; engaging in unfair, deceptive, or fraudulent practices in the making or collecting of a small loan; charging to cash a check representing the proceeds of a small loan; accepting the proceeds of a new small loan as payment of an existing small loan provided by the same lender; or renewing, refinancing, or consolidating a small loan with the proceeds of another small loan made by the same lender. Including any of the following provisions in a loan document: A hold harmless clause; a confession of judgment clause; a mandatory arbitration clause, unless the terms and conditions of the arbitration have been approved by the director of the department; an assignment of or order for payment of wages or other compensation for services; a provision in which the borrower agrees not to assert a claim or defense arising out of contract; a waiver of any provision of this chapter; selling insurance of any kind in connection with the making or collecting of a small loan; entering into a renewal with a borrower.
Penalties and Enforcement: A person who violates this chapter is subject to a civil penalty up to $2,000 imposed by the department; is subject to the remedies provided in IC 24-4.5-5-202; commits a deceptive act under IC 24- 5-0.5 and is subject to the penalties listed in IC 24-5-0.5; has no right to collect, receive, or retain any principal, interest, or other charges from a small loan; however, this subdivision does not apply if the violation is the result of an accident or bona fide error of computation; and is liable to the borrower for actual damages, statutory damages of $2,000 per violation, costs, and attorney’s fees; however, this subdivision does not apply if the violation is the result of an accident or bona fide error of computation. The department may sue: to enjoin any conduct that constitutes or will constitute a violation of this chapter; and for other equitable relief. The remedies provided in this section are cumulative but are not intended to be the exclusive remedies available to a borrower. A borrower is not required to exhaust any administrative remedies under this section or any other applicable law.
