When you apply for a new credit card or decide to take out a loan, you read the fine print—or at least, you’re supposed to read the fine print. You probably check the interest rate and the fee schedule, then let your eyes glaze over for the rest.
But before you sign on the next dotted line, you may want to run a quick CTRL+F for one key term in your loan agreement: “Iowa.”
Yep, the state. It turns out Iowa has some of the strongest consumer protection laws around lending and credit.
The state’s 70-page consumer credit code is thanks in part to what one Reddit user described as “our badass attorney general” Tom Miller. This guy was attorney general of Iowa from 1979 until 1991 and again from 1995 until actually right now. The state’s been putting consumer-friendly lending laws in place since way before it was cool during the last recession.
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So if you see a loan or credit agreement that says the offer isn’t available in Iowa, it means there’s something in that fine print that doesn’t jive with Iowa’s consumer protection laws.
A quick rundown of a few highlights:
Iowa has strict limits on payday loans, per the Des Moines Register.
For example, lenders cannot issue more than $500 in loans to one person at a time. They also cannot charge fees that are more than $15 on the first $100 loaned and then no more than $10 for each additional $100.
Back in 2007, Iowa placed an 21% interest rate cap on car title loans to prevent predatory APRs on these short-term loans.
And added more recently, Iowa places strict caps on late fees for installment agreements and rental purchase agreements. It also limits service fees for loans to no more than $30.
The rules are so strict, explained William Charles at Doctor of Credit, that some financial institutions don’t want to bother lending to Iowa residents.
Because of how strong the laws are in Iowa, customers there aren’t as profitable for card issuers. Most just take this on the chin but some...have decided to bar residents in protest.
Charles wrote that post in 2014, when consumers were confused why Iowans couldn’t apply for the Barclay Arrival card. (That card was recently phased out.)
But there are more recent examples, too. Want to pay for your Peloton or Walmart.com purchase in installments through Affirm? You can’t, if you live in Iowa.
If a lender excludes Iowa in its fine print, it doesn’t mean they’re harboring some terrible secret about their plans to rip you off. It just means that their terms aren’t as consumer-friendly as super-strict Iowa demands.
Finding that one little word in a lending agreement should prompt you to give the document another read-through before signing on. Fully understanding the terms of engagement now may save you some headaches down the road.
