Payday Loans Subject to TILA

The Federal Reserve Board's revision of the Truth in Lending Act (TILA) to cover payday loans became effective October 1. There are several significant changes affecting firms in that field. First, the Board noted that whatever payday loans are called, they are all subject to TILA. These include a cash advance made to a consumer in exchange for the consumer's personal check or an authorized debit to a consumer's deposit account electronically. The consumer may repay the debt or arrange to delay repaying the advance. Further, TILA applies regardless of how the transactions are treated or regulated under state law. Under Regulation Z as a general matter, state laws are preempted if they are inconsistent with Regulation Z. Even if state law does not define as interest a fee levied in connection a payday loan, it is a finance charge under TILA.