I have three payday loans in Illinois that I can't repay. What are my rights?
I need help with payday loans. My husband took out 3 loans called smart loans without my knowledge and we can't pay the interest any longer which we have always been on time. Our problem is we have paid so much interest and principal is not going down. Will a cease and desist letter work... I want to work out a payment plan to pay the principal down only. I have contacted the store and their solution was to take out another loan to make the payment. I do not want to get trapped in that. I would like to pay off the loan in full but have the interest stopped. I closed our bank account so they can not cash the checks, but I am afraid they sue us for check fraud. What are my options I live in Illinois?
Payday loans, also 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. The borrower will give the lender a post-dated check, which the lender later uses to electronically transfer a payment or the entire balance of the loan from the borrowers account.
An especially insidious practice is to withdraw a partial payment from the account as a "customer service." This partial payment becomes a perpetual installment that continues despite the borrowers' best efforts to halt it.
With rates so high and the term of the loan so short there is 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.
One slightly light-hearted fact regarding payday loans: Wikipedia.org, the leading online encyclopedia, list payday lending under Loan Shark, stating that "if the defining characteristics of loan sharking are high interest rates and a credit product that traps debtors, then the label certainly applies."
The Federal Trade Commission offers a great Web page regarding payday loan alternatives.
Payday loans & Illinois consumer rights
In 2005, the Illinois General Assembly put into law Public Act 094-0013: Payday Loan Reform Act , which regulates payday loan companies and the terms these lenders can offer consumers in Illinois. Illinois offers a one-page guide to payday loans.
Consumers have the following rights and protections for payday loans under Illinois law:
- Consumers cannot be charged fees of more than $15.50 per $100 borrowed
- Consumers have the right to a full disclosure of all fees and the annual percentage rate (APR)
- Consumers cannot borrow more than $1000 or 25% of their gross monthly income, whichever is less
- Consumers can have no more than two payday loans at a time
- Consumers can request a repayment plan after 35 days of outstanding debt. Once in the repayment plan the consumer may not be charged interest, finance charges, or any other fees
- A lender may not sue a consumer until 28 days after the loan was due or the repayment plan ended
- A lender may not take an interest in a consumer's personal property
- A lender may not charge the consumer for attorney's fees or court costs to collect the debt
- A rollover of a payday loan is prohibited
- Members of the military have additional protection
- Consumers may cancel a wage assignment at any time by contacting the lender
- Consumers may cancel a payday loan at no cost if the consumer cancels the loan by the end of the second business day immediately following the day the loan was executed
Repaying an Illinois payday loan
Illinois consumers may have two payday loans at any one time. Therefore, if your spouse has three payday loans, the payday lender who made the third payday loan was in violation of Illinois law when it executed the third loan.
If the payday loans are 35 days or more in age, your spouse has the right to enter into a payment plan. Under Illinois law, once your spouse is in the repayment plan your spouse may not be charged interest, finance charges, or any other fees. Therefore, if your spouse has payday loans, the payday lender must allow your spouse to enter into a payment plan and not be charged any fees.
If the payday lender refuses to allow your spouse to begin a no-cost payment plan for a payday loan, contact the Illinois Attorney General (AG) and provide the AG with documentation of the violation. You should get the results you want after the AG's office becomes involved.
More payday loan information
To learn more about tactics and strategies for dealing with creditors, read the Bills.com article Debt Negotiation and Settlement Advice.
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, New York, 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.
See also the no-cost Bills.com Financial Planning and Budget Guide, which can help you manage your finances and you can learn about budgeting and prudent financial management.
I hope this information helps you Find. Learn & Save.