Online Payday Loans

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A word to the wise – you use online payday loans at your own risk.  Bricks and mortar payday loan companies come with their inherent risks and pitfalls, but online payday loans are a whole separate beast.

I have a client right now who has had an online payday loan company continue to process automatic payments (ACH) through his bank account despite his bankruptcy filing.  Two payments have gone through even though it’s been two weeks since his filing.  This situation is not common at all with traditional creditors, but can sometimes happen with online payday loan companies.  Creditors who have physical presence in the real world, have a national presence, and have conducted business for years and years respect and follow federal bankruptcy law which imposes an automatic stay (injunction) against a filer’s creditors once they file a bankruptcy case.  Creditors who ignore the stay and continue to collect or run ACHs do that at their own peril and will be sanctioned.

To give you an example, traditional lenders like big mortgage companies and car lenders are so afraid of violating the automatic stay that they will stop running long-established ACHs authorized by clients, and may decline to take payments made on-line.  Many clients have to call these lenders to reassure them that they want to continue paying despite the bankruptcy filing and re-set up the payment arrangement.  Those creditors are honest and plan to do business in this country for a great long while.

In contrast, many online payday loan companies are incorporated in foreign countries like the United Kingdom, Belize, Pakistan, etc.  Those online loan companies may not honor your requests to stop payment and may be hard to contact and drag to federal court to answer for their wrongdoing in the United States.

Your best bet?  Close the bank account.  “Reputable” payday companies should tell you how you may revoke the automatic payment.  You may not feel that you are in control but you are the person who gives these companies the right to revoke your authorization.  Send them your revocation and ensure your bank is aware you have revoked your authorization.

Some banks will “revive” closed bank accounts to “accept” an ACH from these lenders if the lender disregards your revocation.  These are outliers and NOT common at all in bankruptcy which is why it is best to understand that you use online payday loans at your own risk and peril.

Unfortunately these online payday loans are out to make a quick/easy buck and do not adhere to the same legal and moral standards as more traditional lenders.  The sad truth is that as easy it is to get a loan from them, it can be equally as difficult to shed them off even when you are a legitimate candidate for a bankruptcy filing.  That ease of access comes at a very, very high price.

Of course we will be here to help you if you have an online payday loan company.  Remember, not all of them behave illegally, but some can.  But because of those few bad apples, the best option is still to take steps to close the bank account and redirect your deposits to a different bank.  You may also file a complaint with the Consumer Financial Protection Bureau which is a fairly new federal agency created to help the consumer.  A complaint may be submitted online at consumerfinance.gov/complaint/#payday-loan.

By Karen Maxcy

 

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