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Can Payday Lenders Sue, Arrest, Or Put You In Jail For A Payday Loan?

Many payday loan consumers live in fear everyday because of unpaid payday loans.  The reason why is payday lenders sometimes threaten customers to pay back their payday loan debt within a short deadline or they could face serious consequences if they do not come up with the money on time.  

We have heard several threats and here are some of the most commonly used ones:

1. We will sue you for check fraud.
2. We will have someone arrest you.
3. We will make sure you go to jail.

Are these true?  Can a payday lender really sue, arrest, or put you in jail for a payday loan?  The answer is no.  Defaulting on a payday loan is not a crime and cannot result in criminal charges.  This means that you cannot be prosecuted, arrested, or put in jail check fraud, breach of contract, or anything else that your payday lender might threaten you with.

Making false threats to collect on a debt is illegal in every state.  If your payday lender has threatened you with the statements above, or something similar, it is likely that your payday lender is conducting business illegally and is unlicensed.  This is usually the case if you received your payday loan from a company online.  90% of internet payday lenders are unlicensed, which means that they do not have the legal ability to take civil action against you.  For this reason, they threaten customers into paying them because they know that if they are not successful on collecting the debt themselves, then there is no other way for them to get their money back.  They also cannot take you to court if  you live in a state where payday lending is prohibited.  The states in which payday lending is not allowed are:

• Connecticut
• Georgia
• Maine
• Maryland
• Massachusetts
• New Jersey
• New York
• North Carolina
• Pennsylvania
• Vermont
• Washington DC
• West Virginia

Storefront payday lenders are a different case.  Storefront payday lenders are legal and licensed, which means that they can file a civil lawsuit against you.  The purpose of a civil lawsuit is to simply obtain a judgment for a wage garnishment so that they can be repaid.

To avoid civil action, you need to keep communication lines open between you and your licensed payday lender.  Taking you to small claims court for a payday loan is the last thing that your payday lenders want to do.  Suing you will take a lot of paperwork, money, and time out of your payday lender.  The only reason your payday lender will resort to civil action is if they are hopeless about getting their money back.  The best thing for you to do is to talk to them about your situation and try to work out an arrangement that you can both agree on so that you can both avoid the legal battle.

In some cases, your storefront payday lender may not cooperate with you for a payment arrangement.  If this is the case, try to contact their corporate office instead.  They are usually more lenient to work with and have power over the specific store that you borrowed the payday loan from.  If the corporate office accepts the payment arrangement you are proposing, the store cannot disapprove it.

To avoid encountering these problems in the future, keep in mind that payday loans are short-term loans that should be avoided at all costs.  Do not take out a payday loan unless you are 100% sure that you will be able to pay the full amount back in time.  Never take out more than one payday loan at a time because doing so will set you up for a trap that will be very difficult to get out of.

If you find yourself drowning in payday loan debt, do not be afraid to seek professional help.  Getting out debt is easier with the right payday loan consolidation company on your side.  Do not lose another night’s sleep worrying about your finances anymore.  Do everything you can to help yourself gain the financial freedom you truly deserve.

Avoid the #1 Cause of Payday Lending: Stop Living Paycheck to Paycheck

Part of a payday loan consolidation company’s job is to help each applicant assess their financial situation before signing them up in a payday loan relief program.  It is important to understand what causes an individual to turn to payday loans in the first place because to create a solution, you must first identify the problem.  

Over the past two years, Debt Pay 1 has encountered hundreds of applicants seeking payday loan help.  Not surprisingly, the reason for payday loan abuse is almost always the same.  No matter what reason it is, one word always come up: unexpected.  Unexpected car repair, unexpected medical bills, unexpected emergency, etc.

Seemingly, payday loan consumers have one thing in common: lack of savings.  These are common people who live their lives paycheck to paycheck but do not set money aside for unplanned expenses.  They pay for their monthly bills and have enough money left to get by until their next paycheck.  But what happens if their car breaks down all of a sudden?  What if the house heater stops working during winter?  Where will they get that $500 they need within 24 hours?  These reasons cause people to fall into payday loan debt in the first place.

As we realize the problem, we can turn our focus on how to change the way we spend our money.   Here are five simple steps you can take that can help you stop living paycheck to paycheck:

1. Create a budget.  You will not fully understand where your money is going until you keep track of every single dollar you spend and write them down.  List your expenses such as utilities, gasoline, and food, and how much you spend on them each month.  Obviously, your expenses should come out to be less than your income.  Once you compare your income against your expenses, you will see how much money you can set aside for emergencies.
2. Start cutting back.  If the amount left for your savings is less than what you prefer (or none at all), you could cut back on some of your unnecessary expenses.  Once you know where your money is going, you can easily determine what you can spend less on. Start eating in more often or pack your own lunch instead of dining out.  Rent a DVD instead of watching a movie at the theaters.  Simply cutting back on unnecessary things can go a long way.
3. Take advantage of automatic deduction.  Almost all banks today provide the option of automatic deduction on your accounts.  Take advantage of it by paying your bills and moving money to your savings account automatically.  This way, you can avoid those pricey late fees should you forget to pay a bill.  Plus, you are automatically setting a part of your paycheck aside for emergencies.  Once your bills are paid and your savings are set aside, you can clearly see how much money you have left and you don’t spend it unnecessarily.  The less you think about your bills and savings, the easier it will be to manage your finances.
4. Set rewarding goals.  It is hard to make sacrifices, which is why you need to reward yourself.  What do you want to accomplish?  If you like to travel, plan a vacation by setting aside money for a trip.  Don’t you think it will be easier to avoid the mall when you know that the less money you spend on clothes, the closer you will be to your trip to Hawaii?
5. Earn more income.  If you still find yourself struggling, increase your income.  The easiest way to do this is adjust the amount being withheld from your taxes.  Of course, this means that you will get less on your tax refund, but at least you will have more money to spend each month.  You should also take advantage of your 401(k) plan.  The more you contribute to your retirement plan, the more free money you will receive from your employer.  You may not see its benefits now, but look at the big picture and think about how it will help you in the future.

If you have been living paycheck to paycheck for years, it may seem like it is impossible to break this habit.  It might be hard to get through these changes at first, but it will keep getting easier as you stick to it.  Just imagine how great you will feel once you have the financial security you have been working for.

Can’t Close Your Bank Account? Alternative Methods to Avoid Automatic Withdrawals by Your Payday Lenders

Payday lenders are undoubtedly smart.  Payday loan companies approve loans for hundreds of  borrowers everyday yet have also found a way to make sure they always get paid.  And what better way to do so than to automatically debit your bank account on your payday?  They know you will have the money because you just got paid and they take advantage of this by debiting you a couple of hours after you get your money deposited.  By doing so, they collect their funds before you even get a chance to put your hands on your hard-earned money.  With a blink of an eye, your paycheck is gone and you have no other choice but to take out another payday loan to get you through until your next payday. And two weeks after, the same thing happens all over again.  Sadly, this is the story of almost everyone stuck in the payday loan trap.

If you look at the problem closely, the solution is fairly simple: Close your bank account.

But not all payday loan consumers have the privilege of easily closing their bank accounts.  The most common reasons why some people might not want to close their bank account is: A) they get direct deposit, B) they pay other bills with the account, or C) they have  a negative balance.  This article discusses how you can keep payday lenders away from your money without closing your bank account.

A.  If you are expecting a paycheck by direct deposit soon, you probably would not want to close your bank account.  The solution here is simple: Put a freeze on your account.  A frozen bank account simply means that only cash and check deposits are allowed and any withdrawals are prohibited.  As a matter of fact, you cannot use your debit or ATM card either.  Simply put, putting a freeze on your bank account means that your paycheck will still be direct deposited into your account but your payday lenders will not be able to debit you.  If you are in this situation, the best approach you can take is to put a freeze on your account BEFORE your payday.  As soon as you get paid, you can withdraw your money and close your bank account immediately.  You may then open a new account (preferably with a different bank) and make sure to let your employer know of the changes right away.  This will give your employer enough time to change your direct deposit information on file so that you can rest assured that you will receive your next paycheck without any problems.

B.  If you cannot close your bank account because you use it to pay other bills, you can set up an arrangement with your bank to put a “hard block” specifically on your payday lenders.  First, you need to compose a letter for each of your payday lenders stating that you are no longer authorizing them to debit your bank account automatically.  According to the Electronic Transfer Act, 15 U.S.C. 1693 et seq., you may revoke any company’s right to debit you electronically (even if you have previously allowed them to do so) as long as you provide them with a written document stating they no longer have your consent to withdraw money out of your bank account.  Make a copy of these documents before sending them to your payday lenders (you can send them by e-mail, fax, or mail) and take the copies to the bank with you.  Letting your bank know that your lenders are not authorized to debit your bank account makes the process of putting a “hard block” even easier.  To help you out, you should also print out one of your past statements, circle or highlight the names of the payday lenders, along with the payment amount that the lenders usually withdraw.  Having a “hard block” in place can allow you to use your bank account as you usually do, with the benefit of your payday lenders no longer debiting you.

C.  Some people cannot close their bank accounts due to a negative balance, usually because of their payday loans.  Payday lenders cannot withdraw money from an overdrawn bank account.  However, you now face a different problem: overdraft fees.  If you have a negative balance, your bank will charge you with an overdraft fee every time your payday lenders try to debit your account.  Your payday lenders may not be getting paid but you are ultimately getting into more debt, this time with your bank.  To put an end to these overdraft fees, you can take the same approach discussed in the paragraph above: revoke your payday lenders’ authorization to electronically debit and put a “hard block” on your payday lenders.  If your bank allows it, you should also try to put a freeze on your bank account.  When your bank no longer charges you with overdraft fees, it will be easier for you to bring your account up to a positive balance.  As soon as you do, close your bank account immediately.

While putting a “hard block” on your payday lenders can help you stop your payday lenders from debiting your account, they are not always guaranteed to work.  Below are some problems you may face if you choose not to close your bank account:

1. Most payday lenders conduct business as different company names.  If you put a “hard block” on a specific payday loan company, this company can easily use one of their D.B.A.’s (Doing Business As) to successfully debit your account.
2. Some banks may charge a fee for each “hard block” that you put on your account.  If you are lucky, your bank will only charge you a one-time fee to put a permanent block on each of your payday lender.  However, some banks will charge a fee for EACH transaction that you want to block, which means that you will have to pay a fee for as long as your bank account remains open.

Clearly, it is much easier and safer to close your bank account as soon as you can.  As a matter of fact, an estimated 90% of people who chose not to close their bank accounts for any of the reasons disclosed above ultimately end up closing their bank accounts after a few weeks due to problems associated with their payday loan debt.  Obviously, you can keep your bank account open but only if you must.  However, if you want guaranteed results, your main goal should still be to completely close your bank account as soon as possible.

After closing your bank account, you will undoubtedly want to open up a new one.  You have the option of staying with the same bank or choosing a different one.  If you prefer to stay with your current bank, make sure you advise them not to link your two accounts.  Most banks will automatically link previous accounts to new ones as a courtesy to their clients.  Tell them that you do not want your bank accounts linked.  If your bank links your old account to the new one and your payday lenders try to debit you out of your old bank account, the payment will be successfully withdrawn out of your new one (even if your payday lenders do not have your new bank account number).  If your bank can guarantee that your bank accounts will not be linked, staying with the same bank will not be a problem.  If not, it is best to take your money to a different bank.

Of course, closing your bank account does not mean that you are free from your payday loan debt.  You still have to take full responsibility for paying off your payday loans.  This is simply the first step that you need to take to take control of your finances.  After you prioritize your money and create a budget, make sure you pay off your lenders as soon as you can.  Work out an agreement with your payday lenders in which you can pay them off slowly or pay off one payday lender at a time.  If you need professional help, seek a payday loan consolidation company to assist you.

To get ahead, you should not continue to work for your payday lenders and handing them your hard-earned money each payday.  Stop allowing your lenders to take another penny from your bank account.  Do everything you can to gain back control of your finances and your life.

Protect Yourself: How to Respond to Payday Loan Collection Calls

Defaulting on payday loans has one proven result: the beginning of collection phone calls.  Almost immediately after missing a payment, a debt collector will call to collect the full balance of your payday loan.  If unsuccessful, collectors may use harsh tactics that are considered illegal.  If you have unpaid payday loan debt, you need to know your rights as a consumer to avoid harassment from your debtors.

A common tactic used by payday lenders is calling the references you provided when initially applying for the loan.  Unfortunately, this may include your current employer.  Note that a debt collector can only contact your employer for the following reasons: to verify your employment, business location, and whether you have medical insurance to cover a medical bill.  Payday lenders can also contact your employer to garnish your wages if you have a judgment entered against you.  If a payday lender contacts you for any other reason, then they have crossed the line.

Another popular method of collection is threatening to arrest you for check fraud.  Most are easily intimidated by this threat but really should not be.  In fact, proving that you have committed check fraud is very difficult because a lender must have evidence that you took out a payday loan without intentions of paying it back.   Check fraud is almost impossible to prove, which means you will not get arrested or go to jail for your unpaid debt.

Debt collectors are also prohibited from using obscene and profane language when collecting your payday loan debt.  They also need to call you between reasonable hours, usually between 8:00 am to 9:00 pm.  If a collector calls you repeatedly over a short period of time, this is considered harassing and you can take action against the debt collector.

If you want all phone communications to stop, you need to write a Notice to Cease and Desist Communication to your payday lender or collection agency.  In this document, state that you no longer wish to receive phone calls regarding your debt.  Clarify that you also cannot be contacted at your place of employment because doing so could jeopardize your job.  If you prefer to be contacted by mail, request it in this document as well and provide your current mailing address.  To protect yourself, mail the document certified,  ”return receipt requested” so you have proof of its delivery.  After receiving your Notice to Cease and Desist Communication letter, the debt collector can contact you one final time.  However, a major downside of stopping collection correspondence is that you are leaving your debtor no other option but to take you to court for your unpaid loan.

To prevent legal trouble, the best thing you could do is talk to your debtor.  Instead of ignoring or hiding from your debt collector, respond to them immediately.  Talk about payment options or tell them when you expect to be able to pay the payday loan back.

Another option is to seek a professional payday loan consolidation company to work on your behalf.  Doing so means that instead of contacting you for repayment, your payday lenders will work directly with your consolidation company for negotiations and payment arrangements.  This saves you the time and energy that is brought on by collection practices if you were to deal with your payday lenders yourself.

Payday loans can easily trap you in their cycle and once they do, it is very hard to get out of.  You need to communicate with your debtors and create a plan that works for you financially.  Most importantly, know your rights and make sure you are protected while you get yourself out of payday loan mess.

Should I Borrow Money Directly From a Payday Lender or Through a Broker?

Payday loans are a quick way to get cash when needed, especially in an emergency.  Not only is it easy to get approved, payday loans are also very easy to access.  Chances are there are probably around twenty payday lending stores across a five-mile radius from your home.  Better yet, you can even acquire a payday loan in the comfort of your living room through the internet.  The question is, how do you start applying for a payday loan?  Who do you contact first?

There are two ways that you can apply for a payday loan: directly from a payday lender or through a payday loan broker.

What exactly is a payday loan broker?  A payday loan broker is a company who researches and has information about hundreds of payday lenders.  A broker will be able to provide you with necessary information you need to compare different payday lenders and help choose the right one to apply for: the terms, the amount available for individual payday loans, required identification and whether you need a bank account.

A broker can also help you apply for a payday loan.  First, they will ask you for personal information such as your social security number, contact information, and bank account information.  Your broker will then contact payday lenders on your behalf until one of them approves your application.  Technically, since the broker found the payday lender a customer, the broker will receive a commission.  For this reason, brokers will usually sell your information to numerous payday lenders.  It is then possible that more payday lenders will approve your loan than you asked for and money that you do not want will be automatically deposited in your bank account.  When this happens, you cannot just return the money to the payday lender because now you also owe interest on that unwanted loan.

To avoid this, borrow money directly from a payday lender.  The only advantage of going though a broker is that they do all the tedious work for you and will find you the lowest rates.  However, this is something that you can do yourself, all you have to do is some research.  Contact each payday lender you are considering to do business with and ask how much their interests are and go from there.

Remember, some things are too good to be true.  Going through a broker is as easy as it gets but has dire consequences.  When it comes to applying for a payday loan, borrowing from a payday lender directly is the best option.

Payday Loan Harassment: What Happens When You Default on Your Loan

Payday loans are short-term loans that must be paid in full on your next payday.  If the full amount of the loan cannot be repaid, the borrower must then pay interest and fees in able to keep the loan active.  But what happens when you are unable to pay your lenders anything due to financial hardship?  What can you expect from your payday lenders after you default on your loan?

If you received payday loans online, you will default once your lenders are unable to debit your checking account on your payday.  You can expect an e-mail from your payday lender almost immediately stating that they were unable to withdraw a payment from your account.  Within a day or two, you could also start receiving collection phone calls.  The consistency of phone calls depend on which company you borrowed your loan from.  Phone calls can range from one to five phone calls a day.  If you provided personal references when applying for a loan, your payday lender may also call them.  It is even common for payday lenders to contact you at work, even if you state that you cannot be contacted at your place of employment.  If your payday lender is not able to contact you after a couple of weeks, or months, they could sell your account to an outside collection agency.  A third party collection agency could pursue the debt more aggressively than the original payday lender.  They could keep calling for weeks, even months, until the debt has been paid off.

Storefront payday lenders approach defaulted loans differently.  Since they are licensed in the state to conduct business in payday lending, they would be able to file a case with a small claims court against the borrower.  To obtain a loan from a storefront lender, borrowers need to provide the company with a check of the amount of loan being borrowed plus interest.  Once you fail to pay off your loan, or renew it by paying interest, the payday lender will immediately cash your check.  If the check bounces, your payday lender will often try to contact you by phone first.  Your references and job may also be contacted.  If you cannot be reached, your payday lender can then sue you for nonpayment and check fraud.  The main and only goal of your lenders is to get their money back through garnishing your wages.  If they are successful, you will not only have to pay the full loan amount of the original loan, but you would also be liable in paying any court, legal, and attorney fees.

Upon realizing that you will not be able to pay off your loans, your best bet is to contact your payday lenders directly and set up a payment arrangement so that you can pay the debt off slowly.  You can also negotiate with your lenders to agree on a low settlement that you can afford.  However, you need to evaluate your negotiation skills first before dealing with a collection agent.  People who are in the collection business are trained to get the most money out of you and can be intimidating at times.  If you are unsure of your skills, seek help from a payday loan consolidation company.  These companies are trained to get clients low settlements on payday loans and are successful because they already have existing relationships with major payday lenders across the country.

It is very difficult to get out of the payday loan trap once you get stuck in it.  If you need money fast, it is advisable to completely avoid payday loans altogether.  Talk to friends and family and seek their help first.  Payday loans should be your last option for fast cash.  If you decide to use them, be responsible and pay them back as soon as possible.

How to Pick a Safe and Reliable Company To Get A Payday Loan From

When emergency strikes and cash is needed fast, most people turn to payday loans for quick and easy money.  With so many payday loan companies competing for customers, many are finding new ways on how to make the application process as basic and effortless as possible for consumers.  Unlike other types of loans, good credit is not needed to acquire a payday loan.  Majority of payday lenders only require the following:

• A steady source of income, at least $800 per month
• Be at least 18 years of age
• An open and active checking or savings account in applicant’s name
• Not active in the military

If you meet the above requirements, you can apply for a payday loan either in stores or online.  Both options require applicants to provide sensitive information to payday lenders.  This includes personal data such as social security numbers, phone numbers, home addresses, and employer information.  To give this type of delicate information, many consumers can become confused as to which payday loan companies and options are safe, reliable, and secure.

Many perceive that providing personal information over the Internet could be unsafe.  In some cases, they could be right.  However, certain payday lenders online are now protecting their customers’ data on their websites.  If you decide to apply for a payday loan online, make sure that the website is secured with an SSL (Secure Sockets Layer) Certificate.  To check if a website is secure, change the “http” of the website’s link to “HTTPS” – note the “s” at the end.  A secure site should show up exactly the same as its http version.  You should also look for a lock icon () somewhere in the window of the browser (not in the web page display area!).  Submitting to a secure site means that any data you provide will be encrypted using a complex system before it is transmitted across the web.  This means that the information you submit can only be viewed by that website’s server.  Some reliable payday lenders online are Arrowhead Investment, Cash Jar, Eastside Lenders, Lakota Cash, and Payday Loan Yes.

While applying for a loan online is more convenient for most people, acquiring a loan from a store could be safer to borrowers.  Storefront payday lenders require a business license in order to operate in their state. To be licensed, they are required to follow certain rules and regulations to protect their customers’ data and information in order to prevent fraud and identity theft.  Some storefront payday lenders even offer customers with payment plan options that are easily affordable.  Some of these lenders are Check Into Cash, EZ Money, and Moneytree.

Keep in mind that payday loans are made to be short-term and should be paid off as soon as possible.  As easy as it is to get a payday loan, it is even easier to fall into the payday loan trap and even harder to get out of this debt cycle.  Whichever payday lender and option you choose, always remember that your safety and security should always remain your top priority. 

Reasons Why Lenders Work With Payday Loan Consolidation Companies

If you are one of the millions of Americans drowning in payday loan debt, chances are you have probably already considered seeking help from a payday loan consolidation company.  You have done all the work you had to do to gain the upper hand against your payday lenders: researched online for a good and reliable consolidation company, filled out all the paperwork, and finally, you are ready to get your finances back in control.  Then suddenly, your payday lenders tell you something that stops you in your tracks.  One simple statement that can make anyone in debt feel completely hopeless: We do NOT work with payday loan consolidation companies.

Is this true?  If payday lenders do not work with consolidation companies, then why do they even exist?  Here are the three main reasons why your payday lenders will eventually work with your consolidation company.

1. Before you enroll in a debt help program, the first thing that payday loan consolidation companies will advise you to do is to close the bank account that your lenders have access to.  Although consolidation companies send legal documents to your payday lenders to revoke their authorization to automatically debit your bank account, it is necessary that you close your bank account to make sure that there are no unauthorized charges coming out of your account.

2. Your payday loan consolidation company will also send legal documents to your payday lenders to cease and desist further communications with you.  According to the Federal Trade Commission, payday lenders have to follow certain rules and regulations when collecting debt.  If your payday lenders do not follow these rules and continue to make harassing phone calls, your payday lenders can be fined $1,000 per EACH phone call that they make.  Because most payday loans are small amounts (between $200-$1,000), calling you becomes a risk that is just not worth taking.

3.  Many are afraid that they will get sued if they do not pay off payday loans.  Majority of borrowers do not know that most payday lenders (especially Internet-based) are not licensed to lend money to people residing in the United States.  This means payday lenders do not have the ability to take non-paying customers to small claims court for a payday loan.  Payday lenders often use this tactic to scare borrowers into paying them, and is effective because most customers are not well-informed about what lenders can and cannot do.

Now, sit back and think of this for a moment:  Your payday lenders cannot debit your bank account for payment, cannot call you to ask for money, and cannot sue you for the unpaid loan.  How else will they get paid?  Who else can they turn to?  There is only one answer: payday loan consolidation companies.

So why would your payday lenders deny working with consolidation companies in the first place?  It’s simple.  People who sign up with consolidation companies obviously have several payday loans.  As a matter of fact, people drowning in payday loans usually have between two to twenty payday loans.  Usually, consolidation companies work from one lender to another, which means that if you are a payday lender, you would be unsure as to when you would get paid.  Payday lenders are aware of this and know that chances are, they could get paid faster if there is no third-party involved.  For this reason, they claim that they do not work with payday loan consolidation companies, even though they eventually will.

Do not let your payday lenders intimidate you until you know all the facts.  If you have tried everything you could to get out of payday loan debt yourself but have failed, maybe it is time to seek professional assistance.  After all, who wouldn’t benefit from a little help once in a while?