ATLANTA - A new law intended to curb high-interest loans aimed mainly at the poor and elderly takes effect on Tuesday. <br>
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The Georgia Fair Lending Act, approved by the General Assembly in April, outlaws exorbitant balloon payments, prepayment penalties and other fees on high interest loans. <br>
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The law places Georgia among a handful of states aiming to halt predatory loans that exploit the poor and minorities. <br>
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Almost everyone involved in the lending process including bankers, brokers and anyone buying the right to collect payments is liable if the loan violates the law. <br>
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Penalties include up to six months in jail and a $1,000 fine per violation. There is no limit to how much could be collected in a class-action civil lawsuit, said attorney Donald Lampe, who is the author of a guide for lenders. <br>
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``I think it is going to make a big difference,'' Lampe said. <br>
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Lenders have argued that higher charges are needed to make up for the risk in lending to people with bad credit. <br>
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Loretta Salzano, an attorney who represents lenders, said fear of the law's enforcement will scare off decent lenders who will no longer make loans to people who need them. <br>
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``I don't know one lender in the state of Georgia who will make a high-cost loan,'' Salzano said. <br>
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The law's supporters say many of those who receive the high-cost loans are actually eligible for much cheaper loans. They say those consumers need protection because the loan contracts sometimes require payments beyond the means of borrowers. <br>
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``Our intent is to restrict the bad loans, not the good loans,'' said Sen. Vincent Fort, D-Atlanta, the chief sponsor of the act. ``It's a good law, and we need to see how it works over the next few years.'' <br>
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The lending law will be enforced by the Georgia Department of Banking and Finance. With 80 field examiners, the agency is responsible for regulating 270 banks, 80 credit unions and 3,000 mortgage lenders and brokers.
