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The business of payday loans serves consumer needs through
cash advances. These funds are generally obtained by people
who depend on their own anticipated wealth and assets. This
industry developed primarily when people needed funds and
were unable to benefit from conventional means of credit such
as banks. The varied forms of such entities are called cash
loans, cash advances, payday loans or payday advances.
This business of payday loans offers cash advances to consumers
at excessively high rates of interest. Many states have adopted
the "Small Loan Acts' which charge higher interest rates
for cash advances usually ranging below $3000. The adoption
of this legislation also acknowledges that individuals with
bad credit history will not avail of such credit unless different
financial returns than those otherwise permitted are obtainable.
The credit card revolution gave the American public the advantage
of using this plastic resource towards a greater availability
for short term cash advance. However, many people for the
lack of previously held poor credit records or prior difficulties
were excluded from this source of cash advances. This in turn
led to the development of the payday loan industry. This business
was based on the likely earning capability of the client and
did not involve a promise of security or guarantee. Thus,
the payday loan business involves an advance against a future
deposit which the borrower promises to make. Banks were skeptical
in investing in customers who needed short term cash advances,
except if they were credit worthy enough for a credit card
or cash reserve account. Thus, in order to satisfy the needs
of these consumers, unable to benefit from traditional and
non-traditional finance institutions under existing laws,
the payday loan business foresaw a potential market and developed
into a full fledged commercial trend.
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