If you have bad credit, chances are good that you have taken out a payday loan at least once. So new legislation introduced today may affect your bad credit and your borrowing. The Payday Lending Limitation Act of 2010, sponsored by U.S. Sen. Kay Hagan, seeks to curb practices of payday lenders considered abusive, practices that often turn short-term emergency borrowing into long-term, expensive lifestyles. The bill would modify the Truth in Lending Act to make payday loans less onerous for the people with poor credit who relay on them.

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"Too many hard-working individuals have fallen victim to payday lending. Payday lenders prey upon folks who find themselves in need of a quick loan. These lenders charge astronomical interest rates and expect unrealistic repayment terms," Hagan said.

Critics like the Center for Responsible Lending (CRL) have pointed to payday lenders' pushing a short-term product, the payday cash advance, in order to trap customers into repeatedly incurring fees and high interest as they are forced to renew the loan over and over. This happens because payment on many loans comes due in just a few days, with the addition of high interest. Borrowers who can't come up with the entire amount end up having to take out new loans, with another batch of fees, to repay the old advances.The cycle continues as the balances get bigger each week and the borrowers have no way out.

When high fees are piled on and short-term advances become long-term loans, borrowers may pay as much as 400% interest on payday loans. A tough economy makes it even harder to break free. Over 60% of payday loans are taken by borrowers with 12 or more transactions per year, and 24% go to people with 21 or more annual transactions.? Transaction costs average about $50, so you can see where paying $50 a dozen times, plus interest, to borrow $500 for twelve one-week periods would come to a cost of more than $600. Annualized, you get over 400%. Payday borrowers generally choose loans of $300 to $500, secured with a post-dated check or debit authorization dated on their next payday.

The bill would make the following changes to the Truth In Lending Act:

1. Borrowers with six loans over the previous 12 months or 90 days of indebtedness would be prohibited from getting new payday loans--this is the same standard federally-regulated banks have adhered to since 2005.

2. Borrowers must be offered an option to repay their loans over longer terms.

3. The Federal Reserve will be able to require licensing and bonding of payday lenders.

These kinds of loans can be obstacles to financial security and to getting rid of bad credit. Wean yourself off of payday loans and other bad credit financing; it will cost less to borrow and your credit can improve dramatically.