Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Apr 26, 2012

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Delaware’s state House is preparing to vote on House Bill 289 this Thursday which is aimed at restricting payday loans within their borders, according to The Associated Press. This regulatory bill is meant to restrict the number of payday loans that borrowers can take out in a 12 month period to just five.

In tandem with the cap on originations, the bill also seeks to limit the number of rollovers permitted on a payday loan to just four.

Additionally, House Bill 289 will modify the definition of what the state considers to be short-term loans to include those of up to $1,000, instead of the $500 ceiling the state’s law currently dictates.

In order to help payday lenders abide by these new limitations, the state will also fund the creation of a database that will track whether a potential borrower already has an outstanding payday loan, which will be accessible by any of Delaware’s payday lenders.

Payday loans are a form of short-term financing that allows bad credit borrowers to acquire cash in a matter of minutes.

In return for this service, however, this type of borrowing comes with very steep fees that consumer advocates often accuse of being usurious. These steep fees often lead borrowers to take out additional payday loans in order to pay off their previous ones — a process which is commonly referred to as “rolling over.”

When borrowers begin rolling over their payday loans, they often find themselves in a sinking debt trap, wherein their financing continues to grow with each successive origination.

Since those who seek short-term lending opportunities often already are in poor financial situation, opponents of this industry claim that it doesn’t help, but instead it preys upon those with little money or poor financial histories.