When a debtor files for bankruptcy, an automatic stay is immediately effective stopping all collection efforts until the bankruptcy case has been dismissed. While the bankruptcy is still in progress, creditors must stop all collection activities including cash collections. But Payday loans are a bit more complex and take some additional measures to make sure the collection stops as soon as possible. Here’s how:
Before you contact your debt collection agent, check with the Better Business Bureau (BBB). Any payday loan company or broker who violates the terms of the loan agreement could subject your account to federal and state enforcement actions. The BBB keeps records on all complaints filed with it and you may find the names of certain individuals or companies if you do an online search. While you’re at it, search for “cease and desist” letters and “cease and damage” orders.
If the lender contacts you to collect the money owed, confirm the account is closed. Often a borrower who fails to pay his or her loans on time will be instructed to send a post-dated check for the amount owed plus interest and applicable fees. If the check is not cashed within a week, the lender may report the non-payment to the BBB. You must then provide written evidence that the account is closed or, if the account is open, that you have paid the loan in full. As mentioned above, if the balance due is not paid in full, repayment may result in additional interest and or fees.
Once the borrower has provided written evidence of the status of his or her account, you may consider adjusting the interest rate and/or applying for a loan Mod. A pay day loan lender may lower the interest rate and/or apply certain fees to reduce the outstanding balance on a loan Mod. If you are already paying a modified loan, the pay day lender will most likely require you to sign an agreement authorizing the company to pursue collections. If you do not authorize the collection efforts, they will fail to collect the default fees.
Many borrowers mistakenly believe they can “shop” for a better rate by requesting a higher loan amount, but the practice is illegal. Payday lending companies are only licensed to lend up to the full amount of your loaned amount, unless otherwise specified in your loan agreement. If the amount you borrowed is higher than the maximum you qualify for, you should consider working with a legal advice bureau to see whether the payday lending company is legally permitted to pursue collection of the default fees.
If you have a pay day loan, it is important to remember that the amount credit extended to you represents a promise to pay the money borrowed. When that promise is not kept, borrowers are subject to the provisions of the Fair Debt Collection Practices Act (FDCPA), which outlines the rights of creditors have when borrowers fail to meet their financial obligations. For example, failing to pay a loan on time could result in a creditor-debtor contact, collection calls, and possible legal action. Credit counseling services can help you understand the FDCPA and can provide information about preventing debt problems before they arise. To learn more about avoiding common loan pitfalls and how to solve them, register for a free mortgage guidebook.