Before Opening a New Line of Credit, Check for This Limitation
When you apply for a new credit card or decide to take out a loan, you are reading the fine print – or at least you should be reading the fine print. You will probably check the interest rate and commission chart and then leave your eyes on the rest.
But before you sign on the next dotted line, you can quickly press CTRL + F for one key term in your loan agreement: Iowa.
Yeah, condition. It turns out that Iowa has some of the strictest consumer protection laws around loans and borrowings.
The state’s 70-page consumer credit code is due in part to what one Reddit user called “our cool attorney general” Tom Miller. This guy was the Iowa attorney general from 1979 to 1991 and again from 1995 until actually right now. The state is enacting consumer-friendly credit laws even before it got chilly during the last recession .
So, if you see a loan or credit agreement that says the offer is not available in Iowa, it means that there is something in the small print that does not comply with Iowa’s consumer protection laws.
A summary of a few highlights:
According to the Des Moines Register , Iowa has strict restrictions on payday loans.
For example, lenders cannot make loans over $ 500 to one person at a time. They also cannot charge more than $ 15 for the first $ 100 and then no more than $ 10 for every additional $ 100.
Back in 2007, Iowa set an interest rate limit of 21% on car loans to prevent predatory annual rates on these short-term loans.
In addition, it was recently added that Iowa is setting strict limits on late fees under installment agreements and lease sales . It also limits loan servicing fees to $ 30 .
The rules are so strict, explained William Charles of Doctor of Credit , that some financial institutions are reluctant to take out loans to Iowa residents.
Due to how strict the laws are in Iowa, clients there are not as profitable for card issuers. Most just take it for a chin, but some … in protest decided to ban the residents.
Charles wrote this post in 2014 when consumers were confused as to why Iowa residents could not apply for a Barclay arrival card. (This map has recently been discontinued.)
But there are more recent examples. Want to use Affirm to pay for your purchase on Peloton or Walmart.com in installments? You can’t if you live in Iowa.
Just because a creditor rules out Iowa in fine print doesn’t mean he’s hiding some terrible secret about his plans to rob you. It simply means that their terms are not as consumer-friendly as the super-tough Iowa demands.
Finding this short word in a loan agreement should prompt you to read the document again before signing. A complete understanding of the interaction conditions now can save you headaches in the future.