Monday, March 07, 2016

Payday Loans: Myths and Facts!

More often than not these days, the clients I see who are considering bankruptcy have taken out one or more Payday Loans.

Generally speaking, a Payday Loan (also referred to as a Cash Advance Loan) is a small loan that at least in theory, is paid off by the borrower’s next payday.

The borrower goes to the Payday Lender, gives the lender some proof of actual employment, and then gives the lender a postdated check for the amount they want to borrow plus the fee  for the amount they borrow.  The lender then gives the borrow the money, less the fee and agrees to hold the check until the borrower’s next payday.

When the loan becomes due at the next payday, the lender either deposits the check (often the borrower agrees to permit the lender to automatically withdraw from the borrower’s bank).
So, what happens when payday rolls around and you need the money for something else?

Well, your friendly Payday Lender agrees to hold the check until the next payday, for an additional fee.

Borrowing money this way is expensive.  How expensive?

The Federal Trade Commissions, Bureau of Consumer Protection provides an excellent example, pointing out that if you borrow $100.00 from a Payday Lender with a charge of $15.00 and roll the loan over once for another $15.00 fee and then pay off the loan, you just paid 391% interest to borrow $100.00 for a month.

The reality is that most Payday Loans are for a range of $300.00 to as high as $500.00 with much higher fees.

What can and can’t a Payday Lender do if you don’t pay back the loan?

One Thing They Can’t Do Is Put You In Jail!
At least they probably can’t!  Why can’t they?

Because when the Payday Lender takes a post dated check it knows that the money is not in the bank.
If you go to a store and knowingly write a bad check, that is a crime, and if a District Attorney can prove that you wrote the check knowing that you didn’t have the money in your bank account you will be fined, and even perhaps go to jail.

This is because of what you intended to do when you wrote the check.

The store owner had every reason to believe the check was good, the Payday Lender does not.

The Payday Lender Knows It Is Taking  A Bad Check and you wrote the check with every intent on paying back the loan.

It is unlikely the a DA will ever accept charges for a bad check under these circumstances.
I should point out that if someone were to write a check to cover a Payday Loan and then immediately close the checking account, that the DA might look at the issue a little more closely.

What Can A Payday Lender Do?
  • They can call you to demand payment.  Repeatedly and relentlessly!
  • They can simply attempt to cash the check, or if they have authority to automatically withdraw the money, they will, with the likely result of overdrawing your checking account.
  • They can sue you, and get the amount owed, court costs interest and attorney’s fees.
  • They can garnish your wages once they have a judgment.
  • They can turn the debt over to a debt collector.
Very rarely does someone go to a Payday Lender as their first borrowing source.  Payday loans are often a sign that an individual is in a bad financial situation.
 
Payday loans can be discharged in bankruptcy!

Attorney Mark Williams is a highly experienced Bankruptcy Lawyer, and he can help! 

Check out more valuable information about Guam's Laws and working with Mark Williams, Guam's Best Lawyer, on Dededo Law Office's website, www.GuamLegal.com.

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