The Department of Justice and state regulators target banks that serve a wide range of what they consider dubious financial firms, including some online payday lenders. I applaud the government's efforts to eliminate bad actors who engage in fraudulent transactions or who violate federal laws. But I am deeply concerned about the unintended consequences this could have on the financial services essential for the underbanked that depend on legitimate short-term lenders, commonly known as payday lenders.

A payday loan is quite simple. A person urgently needs short-term cash and goes to a payday lender. A person who has a job, a checking account and valid ID can borrow $ 100 to $ 500 until their next payday. These borrowers write post-dated checks or provide written authorisations to the payday lender for the loan amount plus fees, which are usually 15%.

The first typical troubleshooting transaction is completed in 20 minutes. Few banks are willing to make these types of loans - and the transaction costs are just too high.

Millions of middle-income Americans live on paychecks. They do their best to manage their love or finances so that all of their obligations are met. But when something happens unexpectedly, such as a blown transmission, an unexpected doctor's bill or a roof repair if necessary, their financial schedules are cancelled and the need for short-term credit may arise.

Some people turn to relatives or friends for help in a crisis. But many may face Hobson's choice to choose between having their power cut, their car repossessed, their job lost, their unpaid rent or mortgage, or their bad check. Best payday loans companies offer a better outcome.

Critics of payday loans cite the high-interest rates they charge. A $ 15 fee/charges on a $ 100 advance for two weeks is equivalent to an annual percentage rate of 391%, or APR. This is high when expressed as an annual rate, but keep in mind that the typical term for these loans is a few weeks. It should also be noted that the annualized interest rate on average payday loans is much lower than it would be for the costs of an NSF check or late mortgage or card payment.

The cost is $ 15 of a $ 100 payday loan is also paltry in comparison to the loss of income when a car is out of service and a job lost. Good payday lenders clearly disclose the terms of their loan, including the dollar amount of all fees and the APR. In addition, payday lenders are regulated and supervised by state agencies and also by the new Federal Office of Consumer Financial Protection. My company has worked with payday lenders to bring them into compliance with applicable bank regulations.

Some lenders avoid regulation by setting up operations abroad or on an Indian reserve beyond the reach of regulators. I applaud the regulators for trying to end these operations by denying them access to the banking system.

But I also warn of the potentially unintended consequences of chasing all payday lenders from the banks. This is the last thing that we need at a time when the economy is languishing, largely because most creditworthy can easily qualify for the bank loan.

When you reach this point, banks would be well advised to conduct due diligence on their payday loan customers to determine whether they are complying with national and federal laws, have established regulatory compliance and anti-money laundering programs. , follow the best practices of professional associations and obtain valid client authorisations for automatic funds transfers. If a lender cannot answer these questions in the affirmative, the bank is probably working with the wrong customer.

Some argue that payday loan portfolios carry huge losses because the loans are never really repaid - simply renewed over and over. But most states limit the number of deferrals, and most payday lenders impose similar limits even in the absence of state laws.

The risks associated with payday loans are mitigated due to the enormous diversification of portfolios and the risks are built into the fees. It is possible for a reputable and efficient payday lender to maintain high loan loss reserves and substantial capital compared to payday loans while obtaining decent returns.

Regulators would do well to examine the well-being of borrowers in various regulatory frameworks before taking action to endanger the people they are trying to protect - the underbanked. The truth is that thousands of customers have a very favorable experience with the short-term loan product, and we must be careful not to disrupt this important lifeline.

Nowadays, it is really easy to get lost among thousands of different loan companies in the market. Their websites are full of reassuring images and tons of promises that this is the company that will provide you with the best payday loan there is. As neat and comforting as it may seem, this is not always true.

There are a some easy rules to follow if you want to find the best payday lender in your area and take out a quick, secure and inexpensive loan. Here we go.

Rule one: size matters

According to a private statistics agency based in Houston, Texas, about 30 to 40 percent of payday loan companies nationwide are fraudsters or overcharges. These are usually small night businesses that have no offices and are based strictly online.

Therefore, if the company you want to contact for a loan seems shady, just check their website and find out if they have offices. Remember that not all online businesses are scams, but the chances of you getting scammed by such a business are much higher.

Second rule: compliance with standards

This is the basic rule on how to distinguish a decent business from a shady business. Only loan companies that provide APRs that comply with official local government rates are safe to use.

Try searching Google for the maximum APR statistics on instant loans in your state and use it when you're looking for the company that will give you the best payday loan out there.

Rule three: Customer contact

A reliable loan company cannot do without a customer relationship service. You will need to check if the lending agency has a phone number or a live chat that you can use to contact them.

This way you can find out how friendly the staff are and how reliable the business is. In addition, you will have the opportunity to ask any question if you have any doubts.

Rule Four: Always Get Better Insight

Be sure to read the FAQs, privacy policy and terms of use located on the website of the lending company you plan to use. The information in these sections is intended to be transparent, easy to understand and convincing.

And although on the main page of this or that company, you can read that they must offer you the best payday loan, the devil is in small print in these documents. Always check with them to see if everything is fine or not.

Rule five: never take one in a hurry

The worst instant loans are always taken out when in a hurry. To get the cheapest, safest, and best payday loan in your area, you need to carefully choose the companies you want to turn to, weigh all the pros and cons, and try to find out by trial and error which the company is the best.