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California Debt Blog: 4 More Concerns about Short Term (Payday) Loans

October 11, 2013 by Jonathan Stein

Last week’s post received such a response that I thought I would share more concerns about payday loans. These short term loans look like a good solution for some people, but for over 90% of the population, they are a trap. A better option is to go to your bank or credit union and get a loan that way.

But, since people continue to get these short term loans, I thought I would share more concerns about these payday loans:

1. Aggressive litigation. High risk lenders are more willing to take on aggressive litigation tactics. These tactics can include “sewer serves” where the process server may not serve the borrower personally, litigation in an improper location, like in a county different from one where the borrower lives, or suing for an amount that they may not be entitled to collect. These tactics make it important that you talk to an attorney as soon as you get behind.

2. Attempting to get money from your bank account. Consumers have reported that these high risk lenders may try to deposit post dated checks prematurely or they may try to collect money from your bank account even without your authorization. These tactics, while generally not legal, may be authorized by your loan agreement. You need to read this agreement carefully and you should advise them in writing that they are not allowed to do this.

3. Fees on top of fees. Especially for consumers who end up rolling one loan into another, high risk lenders may add fees on top of fees on top of fees. For example, if the first loan cost you $45 for a $300 loan, and you cannot pay it back on the due date, you may end up paying another $45 in fees plus fees on the $90 in fees. The loan agreement will spell out these fees and terms.  

4. Consider your alternatives.  According to the FTC, you should consider alternatives to these loans. These alternatives include shopping carefully for credit, asking your creditors for more time to pay your bills, contacting credit counseling agencies or an attorney, and if you must borrow money, borrow only as much as you can afford to repay with your next paycheck.

Sadly, I have seen the first three all this month and we are not even half way through the month. Lenders have tried to ACH, or electronically remove money, from accounts without authorization, have filed lawsuits in the wrong venue, or location, and have added fees on top of fees.

Before you get a payday loan, consider these concerns and talk to your family about other options that may be available for you.

 

Categories: Credit, Current Affairs, FDCPA, Hiring an attorney, Legal Process, News Tags: ACH, bank account, credit counseling, fees, FTC, loan agreement, payday loan, process server, short term loan

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