Many people seeking a loan from a short-term, high-interest lender do so because they are desperate. They may need to pay rent to avoid being evicted or pay a utility bill to prevent discontinuation of services. No matter what the reason, these consumers are entitled to the same protections as any other borrower under the Fair Debt Collection Practices Act (FDCPA). Unfortunately, payday lenders are notorious for violating this act when collecting on loans.
How Payday Loans Work
A payday loan is actually a cash advance secured by a personal check or paid by electronic funds transfer. The transaction works like this: the borrower writes a personal check to the lender for the amount he wants to borrow plus the fee he must pay. The lender gives the borrower the amount of the check, less the fee, and agrees to hold the personal check until the loan is due—usually on the borrower’s next payday. Some cash advance companies also offer an electronic option where funds are transferred into the borrower’s bank account and then withdrawn by the lender on the borrower’s payday. The cost of these transactions is very high, especially when the loans are extended or rolled-over beyond the initially agreed-upon due date. It is not unusual for a borrower to pay, for example, $60 in fees and interest to borrow $100.
How These Lenders Violate the FDCPA
Attorneys in many states have successfully won settlements against various payday lenders due to unfair lending and debt collection practices. Some common violations made by these companies include:
Excessive phone calling
Calling outside allowable hours
Becoming verbally abusive over the phone
Threatening police action
Disclosing private information to unauthorized parties
Providing misleading or dishonest information
Even if desperate circumstances led you to take a payday loan and you are struggling to pay it back, you are still entitled to protections from abusive debt collection tactics. No lender, even a strip-mall cash advance company, is allowed to harass and threaten you in an attempt to collect a debt.
Seek Alternatives to Payday Lenders
Our best advice is to avoid borrowing from cash advance lenders altogether. However, if you’re already in debt to one of these companies, you can take legal action to stop the harassment and, if you can prove any other illegal practices on their part—such as failure to disclose loan costs and interest rates—you may be able to seek damages. Fill out the form on this page and let us know how a payday lender has violated your rights. We will let you know if you have a case.