Payday Loan Debt Advice – How To Avoid Excessive Direct Withdrawals From Your Bank Account By Your Lender?
If you are looking for payday loan debt advice on how to protect your bank account from excessive withdrawals by your payday lenders, you have finally come to the right place. When you sign up for a payday cash advance, you are usually required to authorize your lender to access your bank account and withdraw the payments directly from it for the repayment of the money lent to you.
Why Do You Have To Authorize A Payday Lender To Access Your Bank Account At The First Place?
Payday loan companies do not do credit checking of the loan applicants to determine their eligibility. In fact, since they approve the loan quickly, they do not even have enough time to verify all the details you provide to them. All they look for in ‘eligible’ candidates is that they must have a bank account (preferably checking bank account) in their name. In order to make sure that the bank account details provided by you is accurate, they require you to authorize you to make direct withdrawals to ensure timely repayment. They usually claim that they do this to cover the risks they are taking by not checking the credit ratings of the borrowers and by not verifying other details. Since most of the borrowers are also in need of extra money urgently, they are usually highly tempted to do ‘anything’ that should allow them to qualify for a quick loan. This is just the beginning of getting into a payday trap.
So, What Is The Problem With Direct Withdrawals By Payday Lenders?
The problem is that the vast majority of payday lenders are unscrupulous ones. Once they start withdrawing money as part of debt collection, they may never stop. This is when you need some payday loan debt advice because the debt situation soon becomes out of control. This is particularly true in cases where you have failed to make timely repayment. In that case, you are charged with an array of penalty fees and additional interest charges. Considering the extremely high rate of interest rate and the hefty amount of penalty fees they charge, the outstanding balance on your payday loan account starts growing rapidly. For example, if you have borrowed a $500 of loan, you will be expected to pay somewhere around $800 on the due date. If you fail to repay in time and request for a one-month extension, the outstanding balance will go up fast and you are likely to repay somewhere around $1200. If you choose to repay partially, say $600, you will still be liable to pay back $600 more. If you wait for another month to repay this amount, the
outstanding balance will again become around $960 the next month. If you again make a partial payment, say $500, you will still have a debt balance of $460, which will again become almost double the next month because of the extremely high amount of additional interest and penalty charges. As you can see, the nonpayment on payday loans can easily create a nasty cycle of debt that refuses to die until you manage to make the full payment.
Are Such Payday Debt Collection Practices Legal?
If you are looking for payday loan debt advice regarding whether such collection practices by payday lenders legal, the first thing you must keep in mind is that payday lending is banned in sixteen states. Some of the remaining states where it is still legal have imposed legal provisions and prohibited rollovers or renewals of payday loans (the way it happened in the above example). Many other states have restricted the maximum number of rollovers to one, two, three or four. The problem here is that most of the loans are issued online by Internet based lenders and they often do not follow the payday loan laws applicable in your state. It is important for you to understand that the laws of your state apply to them also regardless of which part of the world they have their offices located at.
How To Protect Your Bank Account?
If you are also trapped into a situation where your payday lender is withdrawing money directly from your bank account continuously just because they have the authorization letter, you must seek payday loan debt advice immediately. For example, you should contact your bank and discuss the issue with them and ask for your options. In general, the payday industry rules and the federal laws provide you the legal right to un-authorize the lenders from accessing your bank account. However, just by blocking the lender, you cannot get rid of the actual payday debt; you are still liable to pay back the debts. This step just gives you temporary relief and an opportunity to take better control of your finances. Make sure that you request the bank in writing to stop such withdrawals.
Once you protect your bank account, this is the time to get payday loan debt advice on how to deal with the rapidly growing payday debts. First of all, you will have to find out if your lenders are violating the laws of your state. If yes, you should request them to charge you correctly as per the laws. If they refuse to do so, you can file a complaint against them with the FTC and with your state authority. If you really owe the debts and no legal violations have taken place, you may have to look for debt relief solutions like debt consolidation.