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Advice on payday loans and default - The Bills.com Blog
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Advice on payday loans and default
Friday, Oct 12, 2007
Question: I have three payday loans and I can not afford to pay them. The interest is eating me up. I am trying to raise two teen-age daughters. I thought I could pay these loans back when I took them out. But, for me to keep a roof over our heads there is nothing I can do but default on these loans. What can they do to me if I can't pay?
Answer: These small loans, often called "cash advance loans," "check advance loans," or "deferred deposit check loans," are a frequent pitfall for consumers. A fee anywhere from $15-$30 per $100 borrowed is charged for an average loan of $300. With rates so high and the term of the loan so short, there's no wonder that a very high percentage of these loans are rolled over by the borrower again and again so that the accumulated fees equal an effective annualized interest rate of 390% to 780% APR depending on the number of times the principal is rolled over.If you default on your payday loans, the lender can take the same action as any other unsecured creditor to enforce a defaulted debt. Generally, their collection efforts will start with telephone calls and dunning letters demanding that you pay the balance of the loan. If the payday loan company refers your accounts to a collection agency, you can usually stop the telephone calls by sending a cease communication demand letter, commonly called a cease and desist notice, to the collection agency. A federal law called the Fair Debt Collections Practices Act (FDCPA) states that third party collectors must stop calling you if you notify them in writing to do so. Several states, such as California and Texas, extend many of the regulations in the FDCPA to cover original creditors as well. To find out more about debt collection
laws in your state, visit the Privacy Rights Clearinghouse web site and see the page State Debt Collection Laws and Publications .
If the creditor or collection agency cannot coerce you to pay through standard collection tactics, such as threatening phone calls, the creditor may decide to file a lawsuit against you to obtain a judgment against you for the balance of the debt. If the lender sues and obtains a judgment against you, it can then take steps to enforce the judgment as allowed by your state law. The most common methods of enforcing a judgment are wage garnishment, bank account levies, and property liens. To find out what actions a creditor can take to enforce a judgment in your state, I encourage your visit the BCS Alliance site and see the page Handling Debt Collectors: Wage Garnishments .
Luckily, the majority of creditors do not sue debtors to collect debts frequently; a lawsuit is a worst case scenario, which you will probably not experience. If your lender does take such extreme measures, you should consider consulting with a qualified bankruptcy attorney to find out what legal remedies are available to you.
You may be in luck in regard to your inability to repay these loans. There are eight states whose payday loan regulating statutes require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Check out the payday loan information from the Consumer Federation of America where you will
If the creditor or collection agency cannot coerce you to pay through standard collection tactics, such as threatening phone calls, the creditor may decide to file a lawsuit against you to obtain a judgment against you for the balance of the debt. If the lender sues and obtains a judgment against you, it can then take steps to enforce the judgment as allowed by your state law. The most common methods of enforcing a judgment are wage garnishment, bank account levies, and property liens. To find out what actions a creditor can take to enforce a judgment in your state, I encourage your visit the BCS Alliance site and see the page Handling Debt Collectors: Wage Garnishments .
Luckily, the majority of creditors do not sue debtors to collect debts frequently; a lawsuit is a worst case scenario, which you will probably not experience. If your lender does take such extreme measures, you should consider consulting with a qualified bankruptcy attorney to find out what legal remedies are available to you.
You may be in luck in regard to your inability to repay these loans. There are eight states whose payday loan regulating statutes require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Check out the payday loan information from the Consumer Federation of America where you will
be able to read all about these loans and the various state attempts to regulate them. Follow the "state information" link to find out the specific regulations for payday lenders in your state, and if you live in one of the eight states requiring installment payments. If your state does require repayment plans, and the lender still won"t accept payments, call your state regulator of payday loans, usually an assistant Attorney General, and complain. You should get the results you want after the Attorney General"s office becomes involved.
If you are not in one of those states, you may want to consider simply making payments to the lender of whatever you can afford to pay down the balance of the loan over time. In most states, the rollover limit will soon be reached, and the interest rate the lender can charge will be capped by state law. If the lender will not accept your payments, simply put what you can afford aside each month until you have enough money to either pay off the loan or to offer a settlement. Read up on the regulations in your state to find the best strategy for your situation.
Bills.com also offers more information on the Payday Loan Information page, and has answered reader questions about payday loans in Massachusetts , Florida , Texas , Illinois , and California .
Hopefully, one of the strategies I have discussed above will help you resolve these payday loans, and help you Find. Learn. Save.
Best of luck,
Bill
www.bills.com
If you are not in one of those states, you may want to consider simply making payments to the lender of whatever you can afford to pay down the balance of the loan over time. In most states, the rollover limit will soon be reached, and the interest rate the lender can charge will be capped by state law. If the lender will not accept your payments, simply put what you can afford aside each month until you have enough money to either pay off the loan or to offer a settlement. Read up on the regulations in your state to find the best strategy for your situation.
Bills.com also offers more information on the Payday Loan Information page, and has answered reader questions about payday loans in Massachusetts , Florida , Texas , Illinois , and California .
Hopefully, one of the strategies I have discussed above will help you resolve these payday loans, and help you Find. Learn. Save.
Best of luck,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Bea on Wednesday 23rd April 2008 12:23
I am still unsure of what I should do. I defaulted on a small loan in 2005 and am being harrassed. I have offered to make payments but they refuse. I am being threatened on a daily basis with getting arrested. I of course should have never taken out a payday loan but it was a last resort. Not I don't know what to do about the mess that I am in.
2. Posted by Bill on Wednesday 23rd April 2008 13:35
You should not blindly believe whatever the person on the phone tells you. You have to be steadfast in your resolve, speak to a supervisor if you have to, try and arrange a payment plan. First off, financial matters are subject to civil actions and not criminal actions, you cannot get arrested for it. Please visit www.paydayloaninfo.org and research more about the State laws pertaining to your state.
3. Posted by pam on Tuesday 10th June 2008 20:41
A GA collections company is stating they have a pre-disposition naming me as a head of an online banking ring. They state that they will not pursue if I settle with them and I am considering. Can they file charges against me? How long can they go after a person for a payday loan balance? I am in bankruptcy.
4. Posted by Bill on Wednesday 11th June 2008 10:48
If you are in bankruptcy already, then you should consult with your bankruptcy attorney about this issue. Collections agents get away with a lot of false claims. You need to research about the account in question. All debts are subject to statute of Limitations, which varies from 4 to 7 years. Write to the collections company requesting a "debt validation". Remember that, even if they start the process of litigation in court, you will still have the opportunity to present your case before the judge so just don't get scared because they are threatening you.
5. Posted by QuickCash on Wednesday 10th September 2008 19:40
The other thing I would do is give them notice that they should not cash your checks or do automatic withdrawal because you have insufficient funds in the account. Giving them notice will keep you from committing the crime of bouncing a check. You still owe the money though.
6. Posted by Money and Stress on Monday 22nd September 2008 10:41
I had an internet Payday loan that was taken out over a year ago and after I got in over my head, the bank closed my account because it was overdrawn for so long. I live in Texas and today, a "legal mediator" contacted me and said I have 4 hours to pay the entire amount due and cannot accept payments. They will file suit and they will come to my job or home to serve information on the proceedings. I am so confused, I do not have the entire amount they want (over $800). Help with some info.
7. Posted by Bill on Monday 22nd September 2008 12:09
No debt collector can land up at your job that way, these are usual scare tactics used by these firms in hopes that the consumer is not educated enough and will make the payment out of fear. If they ever do decide to file a suit against you, they HAVE to send a notice to you in writing. Keep insisting that you just don't have the full amount and can only afford monthly payments. You should read about the fair debt collection practices act at: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf http://en.wikipedia.org/wiki/Fair_Debt_Collection_Practices_Act
8. Posted by help! on Friday 14th November 2008 11:33
i defaulted on a loan about a month ago and the calls never stop. he also asked to speak to my supervisor and asked me for my work address. he said that if i dont pay at least 500 dollars within the next few hours, he will put a hold on my social and drivers license. i live in texas and i've never been in this situation before. i'm scared to get in legal trouble. i told him all i could pay for now is 300 dollars but he said i might as well keep it because it's not enough. please help!
9. Posted by Bill on Friday 14th November 2008 11:38
You should not believe everything you hear on the phone, there are laws and procedures that need to be followed before the collector can take action on you. You need to research more and be totally aware of what your rights are. Check out http://www.paydayloaninfor.org and http://www.bills.com/payday-loans/ for more information. Also, go through the FTC's website (www.ftc.gov) to make yourself aware of your rights when it comes to the collection calls. you will be surprised how the collectors tone will change once you tell him that you know what your rights are.
10. Posted by joann on Tuesday 3rd March 2009 19:07
I never heard of payday loans prior to moving to Arizona. I have 15 outstanding loans which amount to approximately 8,000. I do not know what to do. I am so embarrassed and cannot even tell anyone and feel my chest getting tighter and tighter each day. It is such an enourmous amount that I do not even know where to begin. 50% are online. I had to closed my bank account 3 times. I have sent certified letters to storefronts and faxes to online requesting that they do not attempt to deposit as the account is closed. I now am told that my hours are cut at work and am looking into my last option which is bankruptcy. Do you know of a credible non profit payday loan debt consolidation company or do you feel that they will just be taking my money also. I have been in this cycle for 2-3 years and have never seen a paycheck in my account from the time I went to work until I got home my money was all gone and has repeated that way for so long.......I am afraid and do not knwo what to do.
11. Posted by Bill on Wednesday 4th March 2009 11:46
Please see here: http://www.bills.com/blog/payday-loan-consolidation/
12. Posted by Shelly on Tuesday 10th March 2009 13:36
I have a payday loan that I defaulted on in November 2007 because I lost my job. Original loan amount was for $1,200. I received a letter in the mail from their attorney and they are asking for $6,600 in interest. How far back can they calculate interest?
13. Posted by Bill on Tuesday 10th March 2009 18:00
They will calculate interest from the time that you defaulted on the loan.
14. Posted by Mike on Tuesday 19th May 2009 08:56
I took a payday loan in July 2008 and defaulted on it. I live in Philadelphia, pa and received threatening phone calls @ my job yesterday saying that if i did not pay the loan they would file criminal charges (they said the charges would be theft by deception, fraud and laundering). Can they file criminal charges against me? What are my rights, in pennsylvania
15. Posted by Bill on Tuesday 19th May 2009 09:22
Payday loans seem to be prohibited in the state if PA. If you applied for the loan online, different laws may apply. See here:http://www.paydayloaninfo.org/state_detail.cfm?id=PA. Also, criminal charges cannot be filed unless fraud is involved, you can read more on another blog post: http://www.bills.com/blog/payday-collections/
16. Posted by kathleen tornes on Sunday 5th July 2009 14:11
I have recently inquired into payday loans where it got so bad financiallly Ihad to enroll in pdl assistance program to financially get back in control of my finances.Just recenly they are threathening to take me to court and garnish my wages.can they specifically go after my paycheck,according to my consulor at pdl they cant garnish my paychecks here in florida.Can you advise me please,thanks?
17. Posted by Bill on Tuesday 7th July 2009 10:39
Do not believe any legal advice from bill collectors! Here is a link to a summary of consumers' legal rights in all US states. http://www.bills.com/collection-laws/ In Florida, wages are exempt from garnishment.
18. Posted by Shilah on Friday 20th November 2009 10:20
I defaulted on a payday loan in Texas for $1,200 in December of 2008. I received lots of threatening phone calls from the company until they sent it off to another collections dept. This new department claims to be a lawyers office. They threatened to arrest me if i didn't pay the amount in full. I finally stopped answering their calls. I just received a letter stating I am being sued. What is the worst that could happen and what do i do now?
19. Posted by Bill on Friday 20th November 2009 10:29
Please see Payday Loans & Hot Checks in Texas where I discuss the rights that consumers have under Texas law.