Non-standard Lenders in The United States
In the United States, there are lenders licensed to serve borrowers who cannot qualify for standard loans from mainstream sources. These smaller, non-standard lenders often operate in cash, whereas mainstream lenders increasingly operate only electronically and will not serve borrowers who do not have bank accounts. Terms such as sub-prime lending, "non-standard consumer credit", and payday loans are often used in connection with this type of consumer finance. The availability of these products has made illegal, exploitative loan sharks rarer, but these legal lenders have also been accused of behaving in an exploitative manner. For example, payday loan operations have come under fire for charging inflated "service charges" for their services of cashing a "payday advance", effectively a short-term (no more than one or two weeks) loan for which charges may run 3–5% of the principal amount. By claiming to be charging for the 'service' of cashing a paycheck, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs can be effectively bypassed.
Read more about this topic: Loan Shark
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