Items you will need
- Copy of your state's payday lending laws
- Sample cease and desist letter
Payday loans are high-interest, short-term personal loans -- secured with personal checks by customers -- that must be repaid in full on the borrower's next payday. Because of difficult repayment terms, interest rates of 200 percent or higher and coercive collection practices, customers of payday lenders can become trapped in a cycle of repeat borrowing while trying to keep their personal checks from bouncing. Fortunately, more and more states are enacting laws that protect consumers from predatory lenders, giving many customers a method of fending off payday loan collectors.
Review your payday loan agreement. Compare it to your state's laws on payday lending to determine if any laws have been broken by the lender in loaning you cash. For instance, many states such as South Carolina outlaw online payday lenders from loaning funds to residents. Other states such as Arizona and Maryland prohibit all types of payday lending. Make note of any violations.
Write and send a cease and desist letter to the payday lender informing them that you are revoking your authorization for them to cash your personal checks or deduct funds electronically from your checking account, effective immediately. Also state that you no longer wish to receive phone calls about your account to your place of employment, friends, family or home phone. Request that all future collection practices be made in writing. If the payday lender operated legally in all aspects of your cash advance, include a good faith statement that you are requesting a payment arrangement and why. Mail the letter certified with return receipt so that you have proof of delivery.
Call the payday lender and inform them that you cannot pay the full balance of the loan at one time. Politely request a payment arrangement that you can afford over a length of time. If you noted any violations of state law, mention them to negotiate paying only the amount borrowed and to request that interest rates and other fees be waived. Threaten to seek legal counsel if you know laws have been violated and the lender still refuses to agree to a payment arrangement.
Consider hiring the services of a debt settlement counselor, who can negotiate a repayment plan on your behalf with the lender.
Verify the collection agency's identity if you are still receiving harassing collection calls by requesting a license number or by doing an online search for the company or law firm's credentials. Many payday loan collectors will use scare tactics, such as mailing or e-mailing letters disguised as legal notices from lawyers and leaving voice messages threatening jail time or summary judgments against you. Others will make harassing calls to your place of employment or to loved ones. File a complaint against the lender for disobeying the Fair Debt Collection Practices Act. You can file complaints through the Federal Trade Commission, your state's attorney general's office and your state's consumer affairs office.
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