I sent cease-and-desist letters to three payday loan companies. What's next?
I have sent cease and desist letters to three payday loan companies. What will they do now and what should be my next step?
How a cease communication request affects a creditor's ability to continue its collection efforts against you depends largely on the type of collector calling you and on your state of residence. (Find a sample cease communication letter on the Bills.com Debt DIY page.)
Fair Debt Collections Practices Act and Payday Loans
The federal law that regulates debt collection activity, the Fair Debt Collections Practices Act, applies only to collectors who are trying to collect a debt owed to someone else (frequently called "third party collectors"). The FDCPA requires that a debt collector stop calling if you make a written request for it to do so. Therefore, if one of your payday lenders has hired an outside company to collect the money you owe on its behalf, the collector would be required by federal law to stop calling once you send a cease communication request.
However, as I mentioned, this federal law only applies to third party collectors, so if the people calling you are employed by the payday loan company directly, your cease communication request would likely have no force under the FDCPA. However, some original creditors will honor cease communication requests, even when they may not be legally required to do so, because they do not want to accidentally violate any state or federal collection laws.
Payday Loans and State Collections Laws
Although the FDCPA only applies to third party collectors, you may live in one of the handful of states, such as California, Texas, and New York, which have passed state collection laws that extend many of the requirements of the federal law to original creditors. Since I do not know where you live, I cannot tell you specifically if your state collection laws require original creditors to honor cease communication requests sent by consumers; however, if you visit the Privacy Rights Clearinghouse State Debt Collection Laws and Publications, you will find links to state-specific information on debt collection and consumers’ rights laws.
State laws vary widely on this subject, so it is important that you find out what protections your state offers so that you know when debt collectors violate your state’s consumer protection laws and can call them on their unlawful actions. If you feel that an original creditor or third party collector has violated state or federal law in its communications with you, you should consider consulting with a qualified consumer rights attorney in your area. You can search for local attorneys specializing in consumer law by visiting the National Association of Consumer Advocates.
More Payday Loan Information
I assume that you your payday lenders are contacting you because you are having a hard time repaying the short term loans you borrowed. While payday loans can help some individuals to pay one-time unplanned expenses, when consumers try to use these high-interest loans to pay everyday expenses, they often find themselves quickly overwhelmed and unable to pay.
Bills.com also offers more information on the Payday Loan Information page, and has answered reader questions about payday loans in California, Florida, Illinois, Massachusetts, Missouri, Texas, and Virginia.
If you do not repay a payday loan, the payday loan company has several legal remedies, including wage garnishment, levy, and lien. See the Bills.com resource Collections Advice to learn more about the rights of creditors and debtors.
Also, I encourage you to visit the Consumer Federation of America’s payday loan information site, this site offers state-specific information that may help you dig yourself out of the payday loan trap.
I wish you the best of luck in resolving these payday loans, and hope that the information I have provided helps you Find. Learn. Save.
Struggling with debt?
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Housing debt totaled $11.71 trillion and non-housing debt was $4.45 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Indiana, 17% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 4%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.