Rollover in the United States
Rollover in the Federal Budget Process
Meaning of Rollover in the congressional and executive budget processes (GAO source): Instead of paying off a loan when due, the principal and sometimes accrued interest outstanding of a borrower is refinanced (rolled over) as a new loan with a new maturity date. (See also Federal Credit.)
Payday Lending Rollovers or Extensions
On the loan’s due date, the terms of the loan obligate the borrower to repay the loan in
full. Although the States that created exceptions to their usury limits for payday lending
generally did so on the theory these were short-term loans to which the usual usury rules did not easily apply, in 19 of the States that authorize payday lending the lender is permitted to roll over the loan when it comes due. A rollover occurs when, instead of repaying the loan in full at maturity, the consumer pays only the fees due and the lender agrees to extend the due date. We use here the term “rollover” but this practice is sometimes described under State law or by lenders as a “renewal” or an “extension.”
By rolling over, the loan repayment of the principal is extended for another period of time, usually equivalent to the original loan term, in return for the consumer’s agreement to pay a new set of fees calculated in the same manner as the initial fees. The rollover fee is not applied to reduce the loan principal or amortize the loan.
In some States in which rollovers are permitted they are subject to certain limitations
such as a cap on the number of rollovers or requirements that the borrower amortize—repay part of the original loan amount—on the rollover.
Other States have no restrictions on rollovers. Specially, seventeen of the States that authorize single-payment payday lending prohibit lenders from rolling over loans and twelve more States impose some rollover limitations. States that prohibit rollovers include California, Florida, Hawaii, Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, Nebraska, New Mexico, Oklahoma, South Carolina, Tennessee, Virginia, Washington, and Wyoming.
Other States such as Iowa and Kansas restrict a loan from being repaid with the proceeds of another loan. Cal. Fin. Code § 23037(a), Fla. Stat. § 560.404(18), Haw. Rev. Stat. § 480F-4(d), 815 Ill. Comp. Stat. 122/2-30, Ind. Code § 24-4.5-7-402(7), Ky. Rev. Stat. Ann. § 286.9-100(14), Mich. Comp. Laws § 487.2155(1), Minn. Stat. § 47.60(2)(f), Miss. Code Ann. § 75-67-519(5), Neb. Rev. Stat. § 45-919(1)(f), N.M. Stat. Ann. § 58-15-34(A), Okla. Stat. tit. 59, § 3109(A), S.C. Code Ann. § 34-39-180(F), Tenn. Code Ann. § 45-17-112(q), Va. Code Ann. § 6.2-1816(6), Wash. Rev. Code § 31.45.073(2), Wyo. Stat. Ann. § 40-14-364, Iowa Code § 533D.10(1)(e), Kan. Stat. Ann. § 16a-2-404(6).
Other States that permit some degree of rollovers include Alabama (one), Alaska (two),
Delaware (four), Idaho (three), Missouri (six if there is at least 5 percent principal reduction on each rollover),Nevada (may extend loan up to 60 days after the end of the initial loan term), North Dakota (one), Oregon (two), Rhode Island (one), South Dakota (four if there is at least 10 percent principal reduction on each rollover), Utah (allowed up to 10 weeks after the execution of the first loan), and Wisconsin (one). Ala. Code § 5-18A-12 (b), Alaska Stat. § 06.50.470(b), Del. Code Ann. tit. 5, § 2235A (a)(2), Idaho Code Ann. § 28-46-413(9), Mo. Rev. Stat. § 408.500(6), Nev. Rev. Stat. § 604A.480(1), N.D. Cent. Code § 13-08-12(12), Or. Rev. Stat. § 725A.064(6), R.I. Gen. Laws § 19-14.4-5.1(g), S.D. Codified Laws § 54-4-65, Utah Code Ann. § 7-23-401 (4)(b), Wis. Stat. § 138.14 (12)(a).
In most States where rollovers are prohibited or limited, there is no restriction on the lender
immediately making a new loan to the consumer (with new fees) after the consumer has repaid
the prior loan. New loans made the same day or “back-to-back” loans effectively replicate a
rollover because the borrower remains in debt to the lender on the borrower’s next payday.
A handful of States have implemented a cooling-off period before a lender may make a new loan.
The most common cooling-off period is one day, although some States have longer periods
following a specified number of rollovers or back-to-back loans.37 7 States with cooling-off periods include: Alabama (next business day after a rollover is paid in full); Florida (24 hours); Illinois (seven days after a consumer has had payday loans for more than 45 days); Indiana (seven days after five consecutive loans); New Mexico (10 days after completing an extended payment plan); North Dakota (three business days); Ohio (one day with a two loan limit in 90 days, four per year); Oklahoma (two business days after fifth consecutive loan); Oregon (seven days); South Carolina (one business day between all loans and two business days after seventh loan in a calendar year); Virginia (one day between all loans, 45 days after fifth loan in a 180 day period, and 90 days after completion of an extended payment plan or extended term loan); and Wisconsin (24 hour after renewals). Ala. Code § 5-18A-12(b); Fla. Stat. § 560.404(19); 815 Ill. Comp. Stat. 122/2-5(b); Ind. Code § 24- 4.5-7-401(2); N.M. Stat. Ann. § 58-15-36; N.D. Cent. Code § 13-08-12(4); Ohio Rev. Code Ann. § 1321.41(E), (N), (R); Okla. Stat. tit. 59, § 3110; Or. Rev. Stat. § 725A.064(7); S.C. Code Ann. § 34-39-270(A), (B); Va. Code Ann. § 6.2-1816(6); Wis. Stat. § 138.14(12)(a).
Twenty States require payday lenders to offer extended repayment plans to borrowers
who encounter difficulty in repaying payday loans. States with statutory extended repayment plans include: Alabama, Alaska, California, Delaware, Florida, Idaho, Illinois, Indiana, Louisiana, Michigan (fee permitted), Nevada, New Mexico, Oklahoma (fee permitted), South Carolina, Utah, Virginia, Washington, Wisconsin, and Wyoming. Florida also requires that as a condition of
providing a repayment plan (called a grace period), borrowers make an appointment with a consumer credit counseling agency and complete counseling by the end of the plan. Ala. Code § 5-18A-12(c), Alaska Stat. § 06.50.550(a), Cal. Fin. Code § 23036(b), Del. Code Ann. tit. 5, § 2235A(a)(2), Fla. Stat. § 560.404(22)(a), Idaho Code Ann. § 28-46-414, 815 Ill. Comp. Stat. 122/2-40, Ind. Code § 24-4.5-7-401(3), La. Rev. Stat. Ann. § 9:3578.4.1, Mich. Comp. Laws § 487.2155(2), Nev. Rev. Stat. § 604A.475(1), N.M. Stat. Ann. § 58-15-35, Okla. Stat. tit. 59, § 3109(D), S.C. Code Ann. § 34-39-280, Utah Code Ann. § 7-23-403, Va. Code Ann. § 6.2-1816(26), Wash. Rev. Code § 31.45.084(1), Wis. Stat. § 138.14(11)(g), Wyo. Stat. Ann. § 40-14-366(a).
Some States’ laws are very general and simply provide that a payday lender may allow additional time for repayment of a loan. Other laws provide more detail about the plans including: when lenders must offer repayment plans; how borrowers may elect to participate in repayment plans; the number and timing of payments; the length of plans; permitted fees for plans; requirements for credit counseling; requirements to report plan payments to a statewide database; cooling-off or “lock-out” periods for new loans after completion of plans; and the consequences of plan defaults.
- Federal Appropriations
- Entries about the United States Budget Process in the Encyclopedia (including Rollover)
- Public Debt
- Interest Included Note
- John P. Caskey, Fringe Banking and the Rise of Payday Lending, in Credit Markets for the Poor 17, 23 (Patrick Bolton & Howard Rosenthal eds., 2005).
- Reconcilable Differences?: Congress, the Budget Process, and the Deficit (JB Gilmour, 1990)
- Fiscal institutions and fiscal performance (JM Poterba, J von Hagen, 2008)
- The State of Lending in America & Its Impact on U.S. Households: Payday Lending Abuses and Predatory
- Elisabeth Anderson, Experts, Ideas, and Policy Change: The Russell Sage Foundation and Small Loan Reform, 1909-1941, 37 Theory & Soc’y 271, 276, 283, 285 (2008) (quoting Arthur Ham, Russell Sage Foundation, Feb. 1911, Quarterly Report, Library of Congress Russell Sage Foundation Archive, Box 55).
- Information about Payday Loans in the Gale Encyclopedia of American Law.
- A Short History of Payday Lending Law, The Pew Charitable Trusts (July 18, 2012),
- Legislatures and the budget process: the myth of fiscal control (J Wehner, 2010)
- Robert D. Manning, Credit Card Nation: The Consequences of America’s Addiction to Credit (Basic Books 2000)
- Amy Traub, Demos, Debt Disparity: What Drives Credit Card Debt in America, (2014)