The Georgia Installment Loan Act regulates small-dollar consumer loans of up to $3,000 made by non-bank lenders in the state, capping the interest and fees they can charge and voiding the entire contract when a licensee intentionally charges more than the law allows. It covers any loan repaid in two or more scheduled payments by a lender that is not a bank, credit union, savings and loan, or pawnbroker. If you borrowed from a storefront or online consumer finance company in Georgia for $3,000 or less, this is almost certainly the law that governs your loan.1Justia. Georgia Code 7-3-4 – Licensing Requirement; Exemptions
Lines of credit above $3,000 sit outside the Act, as long as nothing in the agreement blocks the borrower from drawing more than that amount. Banks, federal savings institutions, credit unions, and pawnbrokers answer to other regulators and are not covered here.1Justia. Georgia Code 7-3-4 – Licensing Requirement; Exemptions
What a Licensed Lender Can Charge
Every permitted charge sits in a single statute, O.C.G.A. ยง 7-3-11. The math matters, because going over any one of these caps on purpose can wipe out the loan entirely.
- Periodic interest is capped. For loans repayable within eighteen months, the maximum rate is 10 percent per year on the face amount of the contract.
- The origination fee is a one-time charge of up to 8 percent on the first $600 of the loan’s face amount, plus up to 4 percent on any amount above $600.
- A maintenance fee of up to $3 per month can be charged for each month in the loan term, whether you pay weekly, monthly, or on some other schedule.
- A late fee applies only if a payment runs more than five days past due. It is $10 or five cents per dollar of the missed installment, whichever is greater, and the lender can collect it only once for the same missed payment.2Justia. Georgia Code 7-3-11 – Maximum Loan Amount, Period, and Charges; Deferments
These charges stack. On a $1,000 loan, the origination fee alone can reach $64 (8 percent of the first $600 plus 4 percent of the next $400), on top of $3 per month in maintenance and the periodic interest. That is why a loan’s annual percentage rate, which federal law requires the lender to disclose, is usually a far bigger number than the contract interest rate on its own.
Loan Size and Term Limits
No single licensed location can originate a loan larger than $3,000, and no loan can run longer than 36 months and 15 days.2Justia. Georgia Code 7-3-11 – Maximum Loan Amount, Period, and Charges; Deferments The ceiling on term length keeps a small loan from stretching into years of accumulated maintenance fees and interest.
Paying Early and Re-Borrowing
If you pay off your loan before maturity, you are entitled to a refund of a portion of prepaid interest, calculated in complete monthly periods. Unearned maintenance charges have to be refunded on the same basis.3Justia. Georgia Code 7-3-14 – Payment Before Maturity; Refund Borrowers routinely miss this refund because they assume paying ahead costs nothing and earns nothing. Ask for the itemized refund calculation when you pay off.
The Act also limits a lender’s ability to churn your loan for a fresh origination fee. If you pay off a loan in full and take out a new loan from the same lender within 15 days, the lender can only charge the origination fee on the amount by which the new loan exceeds what you just repaid.
If You Fall Behind: Deferment Options
When a payment is going to be a problem, the Act gives you two ways to push it back without defaulting outright.
Hardship Deferment
A hardship deferment postpones scheduled payments with no additional interest, fees, or charges accruing during the deferment period. There is no cap on how long one can last or how many times a lender can grant one over the life of the loan. For a borrower in a tight spot, this is the better option because it costs nothing beyond the delayed timeline.
Convenience Deferment
A convenience deferment lets the lender charge a fee for the postponement, but with real limits. Across the life of the loan, convenience deferments cannot total more than four months. The fee itself cannot exceed what you would get by applying the loan’s original interest rate to the deferred amount for the deferment period, and no other interest or fees accrue during the deferment.
You can also get the convenience deferment fee back in several situations. If the lender renews or refinances the loan within three months after the deferment ends, the entire fee must be refunded. The same refund applies if a hardship deferment follows within three months of a convenience deferment. And if you prepay during the deferment period, the unearned portion of the fee comes back along with any other prepayment refund you are owed.2Justia. Georgia Code 7-3-11 – Maximum Loan Amount, Period, and Charges; Deferments
What the Lender Must Give You in Writing
At the time the loan is made, the lender has to hand you a written, itemized statement in clear English. It must show the date and amount of the loan, the payment schedule, a description of any collateral, the addresses of both borrower and creditor, a breakdown of each class of insurance and its premium, and an exact itemization of interest, fees, and other charges.4Legal Information Institute. Georgia Compiled Rules and Regulations R 80-14-5-.01 – Loan Contract, Disclosures, and Limitations A copy of the complete loan contract, or the itemized statement, has to reach you before any money is disbursed.5Justia. Georgia Code 7-3-15 – Delivery of Copy of Contract or Itemized Statement; Receipts Read the fee breakdown before you sign and check each line against the caps above.
Federal Rules That Also Apply
State caps are not the whole picture. Two federal statutes layer on top of the Georgia Installment Loan Act.
Truth in Lending Act
The federal Truth in Lending Act requires lenders to disclose the annual percentage rate and the total finance charge before closing.6Office of the Law Revision Counsel. 15 USC Chapter 41, Subchapter I – Consumer Credit Cost Disclosure The APR is not the contract interest rate. It rolls origination fees, maintenance fees, and certain insurance premiums into a single annualized number. Two loans with the same contract rate can show very different APRs if one front-loads more fees. The TILA disclosures have to be grouped together and separated from the rest of the contract, and the terms “finance charge” and “annual percentage rate” must appear more prominently than anything else on the page.7Consumer Financial Protection Bureau. Regulation Z – General Disclosure Requirements Any estimated figure has to be labeled as an estimate.
Military Lending Act
Active-duty service members and their dependents get extra protection. The Military Lending Act caps the Military Annual Percentage Rate at 36 percent on covered consumer loans, and the MAPR calculation includes interest, fees, insurance premiums, and other credit-related charges. Lenders cannot make covered borrowers waive legal rights, submit to mandatory arbitration, or pay a prepayment penalty, and a loan that violates the Act is void from the start.8Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents
What Happens When a Lender Breaks the Rules
When a licensee intentionally charges interest or fees above the statutory limits, the Act voids the entire loan contract. The lender forfeits the right to collect anything, including the principal. That is an unusually harsh consequence, and it is the main reason Georgia installment lenders tend to price inside the caps.
The Department of Banking and Finance can also impose fines of up to $1,000 per violation, prosecute knowing violations as a misdemeanor, and suspend or revoke a lender’s license. If the fees on your loan look higher than what the statute allows, pull your loan documents, compare each charge against the caps described here, and file a complaint with the Georgia Department of Banking and Finance.