Posts Tagged ‘check cash advance and bounced checks’

What Happens When You Borrow A Check Cash Advance And Your Check Bounces On Due Date?

A check cash advance is a specific loan program, where you submit a post dated check to a payday lender and you receive instant cash, a lesser value than the amount of the check. For example, if you issue a post-dated check of $360 to the lender, you may receive $300 of cash; the lender charges $60 as their fees, in terms of interest and other charges. Though this type of lending is strictly prohibited in sixteen states and in the District of Columbia, there are other states where this form of lending is still legal and is very popular. Despite the high cost of these loans, the majority of consumers consider it as a very easy way to get instant cash as and when needed. However, here it is important to note that the due date when the lender sends the check for collection is usually just a couple of weeks away. It means the repayment period for these loans is very small. A large number of borrowers fail to arrange sufficient fund in their bank account to ensure the check should not bounce. When the check is returned by the borrower’s bank because of non-sufficient fund, it leads to an array of consequences, which pushes the borrowers into a serious debt trap. Following is a brief rundown on it.

Different Types Of Fees

When you borrow a check cash advance and the check submitted by you is returned by the bank on ground of non-sufficient fund in your bank account, you will be charged different types of fees by both your lender as well as your bank. Here, it is very important for you to understand that even the bank of the lender, where they deposited the check initially for collection also charges a certain amount of fee to the lender’s bank account. In that case, it is justifiable for the lender also to charge penalty fees to the borrower for bounced checks. Many lenders however keep on sending the same check, even if it has been bounced once, again and again for collections, which does not seem to be fair; in fact, in most states, such activities on part of a payday lender is illegal. When the same check is bounced again and again, you are charged multiple times both by your bank and your lender, which actually worsens your financial situation. The only relief is that most state laws allow lender to send the check for collection just once and that the NSF (non-sufficient fund) fee must not exceed $25 or $30.

Renewals And Rollovers

In general, when the check is bounced, a check cash advance lender encourages the borrower to take a new cash advance to pay off the existing debt. They try to attract consumers by making some lucrative offers, such as a bigger loan approved within an hour. Many borrowers fall prey to this trap and their payday debt burden keeps on increasing. Alternatively, your lender may also offer an extension of 30 days in the repayment period, where you are asked to submit another post-dated check (this time, dated to the next pay day). This looks like a convenience offered by your lender, but it is important to note that you are charged a significantly much higher amount of interest this time. For example, if you had initially submitted a check of $360 to borrow a cash advance of $300, you may be asked to submit a check of $450 this time; the additional $90 is to cover the penalty charges as well as the interest amount for the extended period of time. Here, it is very important for you to keep in mind that many states have prohibited this practice of extension in the due date, which is also termed as rollover or renewal, but unfortunately, a vast majority of lenders are still practicing the same.

Small Claims Civil Lawsuits

In extreme cases, where your check cash advance has lost all hopes of recovering the debt from you, they can file a small claim civil lawsuit against you. The US laws however prohibit the lenders from bringing criminal charges against a payday loan borrower for non-payment of debt. This way, though you cannot be sent to jail for not repaying a cash advance debt in time, you may have to face other legal consequences. For example, if it is proved in the court that you owe the debts, the court may issue an order to garnish your wages or to perform liquidation of some assets so that the repayment can be made to the lender. In many cases, the court may also issue a judgment in favor of the borrower, such as by asking the lender to offer a new affordable repayment plan so that the borrower can make the payment easily without damaging his or her finances. Here, it is very important for you to keep in mind that the time frame during which a lender can file such lawsuits may range from just one year to seven years, depending upon the state the borrower resides in. This time frame for payday debt collection is termed as statute of limitations. For example, if the statute of limitations in your state is two years, your lender must stop all collection activities after two years. Please note that this time frame (in our example, two years) is calculated from the date when the last payment was made by you toward your cash advance debt, not when the loan was initially issued to you. It means even if the loan account is 3 years old, but you have made the last payment toward your debt account just six months back while the statute of limitations I two years only, your lender still has one and a half year to collect the debt.

Overall, as you can see, a check cash advance is not only extremely expensive, but it can also bring a lot of financial and legal problems for you. It does not at all make any financial sense to borrow these loans, especially when there are many better alternatives available out there.

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