Payday Loans

What To Do When Payday Loan Providers Turn Your Account To Collection Agencies?

The collection practices that payday loan providers follow have always been a matter of debate. The Federal Trade Commission has even warned consumers against these lenders, not just because of the extremely high rate of interest that they charge but also because of the unfair collection practices they often use. Over a dozen states have now banned payday lending and the states where this form of lending is still legal have enacted several laws to protect the rights and interests of the consumers. If you are facing difficulty in making timely repayment on your payday loan accounts, you must be well aware of the legal provisions that apply regarding collection activities of payday lenders. Following is a brief rundown on it.

Non-Sufficient Fund (NSF) Fee

Payday loan providers usually require you to submit a post-dated check when you sign up for a loan program. On the set due date, they send this check to your bank for collection. If this check bounces due to non-sufficient fund in your bank account, the lenders charge a certain amount of collection fee or NSF fee. Some unscrupulous lenders send the same check again and again for collection, and every time it bounces, they charge a collection fee. It is very important for you to note that most states have strictly prohibited such activities. Lenders are legally not allowed to charge NSF fee more than once. It means they cannot send the same check for collection more than once. Besides that, payday loan laws in different states have also imposed a maximum limit on this fee, which is usually $30.

What is more, when you fail to make the repayment on time, payday loan providers usually renew your loan account. Many others encourage you to borrow a new loan to pay off the previous one. All these practices eventually push you deeper into a vicious cycle of debt. In most states, such practices are prohibited. Some states, where rollovers or renewals of payday loans are allowed, have put a limit on the maximum number of times a loan account can be renewed or rolled over.

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