Are you sure that New York legal for payday loans? I have several loans I’m unable to pay back and they are too much. What do I do? I’m a NY state resident. I got two payday loans on the internet in February. I’ve already paid hundreds of dollars more and far more than the principal balance. I’m not sure what I’m able to afford to pay for these loans any longer. Do you have any suggestions on what I can do? Askbill More Show less Consumers are frequently caught unawares by these loans. They could also be described as “cash advanced loans,” “check advances” or “deferred-deposit check loans.” An average loan of $300 comes with a fee of $15-$30 for every $100 borrowed. The borrower is required to give the lender a post-dated cheque, which the lender later will use to transfer electronically either a payment or the complete amount of the loan from the borrowers account. An especially insidious practice is to withdraw a partial amount from the account in a “customer service.” This is an ongoing installment which will continue despite every effort by borrowers to stop it. With rates this high and the term of the loan so short there is no wonder that a large proportion of these loans are carried over by the borrower repeatedly and again so that the fees accumulated equal an annualized rate of between 390% and 780% APR depending on the number of times the principal is rolled. A humorous fact about payday loans is that Wikipedia.org, the leading online encyclopedia, lists payday lending under Loan Shark, stating that “if the primary features of loan sharking are high interest rates and a credit product that traps debtors, then the term “loan shark” is certainly applicable.” Quick Tip Payday loans are illegal in New York, and a debt collector cannot try to collect on the payday loan of a New York resident. In February of 2013, New York’s Governor directed the New York State Dept. Financial Services to inform creditors that New York’s law prohibits the collection of payday loans. You can file a complaint with the Department. If you’re a New Yorker and a collection agent is trying to collect payday loan from you, it is possible to make a complaint to the Department. The Federal Trade Commission offers great details on the various payday loan options. Consumer rights and payday loans A payday lender may try to collect the balance. The payday lender can transfer the loan to a collection agency in the event that the borrower is in default. We’ll discuss this in the future. If the payday loan lender (or collection agency in this case) can’t get you to pay by using conventional collection techniques like letters and phone calls to collect, it may sue you to recover the amount. If the lender sues and wins a judgment against you, it may follow up to enforce the judgment as permitted by the law of your state in civil court. Bank account levies, and property liens are the most well-known ways to enforce judgments. It is important to note that not included in this list of enforcement actions are making contact with your employer, calling your neighbours, or seeking warrants for your arrest. Refusing to pay a debt can be a civil, however, it is not a criminal offense. Payday lenders often are warned of arrest for check-fraud. This is not true, since the payday lender has to have evidence that the borrower did not intend on to repay the loan. The process of proving that is difficult. Remember that nobody in the United States has been imprisoned or held in debt prior to the Civil War. The borrower is required to pay any outstanding balance in the event that the payday loan provider sells the account to a collection agency. Editor’s Note This page has been closed to comments. See Payday Loans to learn how to manage payday loan collection. Look over the Bills.com resources for payday loans in California, Florida. Illinois. Massachusetts. Missouri. New York. Texas. To learn more about payday lending laws in those states, visit this page. A federal law referred to as the Fair Debt Collections Practices Act (FDCPA) provides that a third-party collection agent is required to stop calling you if you notify them in writing that they must stop calling you. California, New York, Texas and Texas all extend the FDCPA regulations to cover original creditors. Refer to Advice If you are Harassed by a Collection Agency for more information about the steps you should take if you believe that a collection company is violating the FDCPA. If the payday loan company decides to sell the account to a collection company, the debtor may stop phone calls by sending a cease-communications demand letter (also known as a cease-and-desist notice) to the collection agency. For examples of cease-and-desist letters, check out the Bills.com debt help center. How do you manage the collection of payday loans? Many payday loan collectors use intimidation in order to create anxiety among the customers. A person’s situation is not necessarily a sign that they are in financial trouble. is struggling financially doesn’t mean they are no longer entitled to right to be a consumer. As mentioned above, payday lenders may ask borrowers to provide their checking account numbers to enable automatic withdrawals of borrowers’ accounts using the Automated Clearing House. If the account of the borrower does not have sufficient funds and the payday lender is unable to continue to take money. This may create overdraft charges for the borrower. Moreover, when it happens frequently enough the bank could shut down the borrower’s account. One common tactic to combat payday loan in new york, flower4you.us, lenders who frequently remove funds from the account of the borrower is to ask the borrower to close the account and then open a new one at the same bank. This is effective unless the bank connects all transactions made in the old account with the new one. In this case the bank will be able to access the new account to access the funds. The lesson here is to ensure that the bank doesn’t allow electronic withdrawals from the old account to be automatically transferred to the new account. Find out more about the rights you have as a New York as a resident by reading the Bills.com article New York Collection Laws. Payday Loans in New York New York has several laws against payday loans. New York General Obligations Law Section 5-501 sets the rate of civil usury at 16 percent. According to New York Penal Law SS 190.40 and 190.40 the criminal usury cap is 25 percent APR. New York law prohibits check cashers from cashing delayed checks. Payday loans are illegal in New York. How can payday lenders legally operate in New York? New York payday loan lenders partner with banks in states with deregulated banking. These lenders offer loans through electronic funds transfer. They say that their local storefront is brokering loans for the bank that exports interest rates from its home state to New York. This is referred to as rent-a bank lending. The New York City Dept. of Consumer Affairs Tips about Payday Loans outline New York law, and provides suggestions on how to avoid payday loans. Take a look at the New York State Guide to Avoiding Dangerous, or ‘Predatory’ Loans. More details on payday loans For more information on strategies and tactics to handle creditors, see the Bills.com article on Debt Negotiation and Settlement Advice. Bills.com also offers more details on its Payday Loan Information page, and has also answered questions from readers regarding payday loans in California, Florida, Illinois, Massachusetts, Missouri, Texas and Virginia. Payday loan companies have a variety of legal options if you do not pay off your payday loan. This includes wage garnishment, lien, and levies. Find out more about creditors and debtors by visiting the Bills.com resource Collections Advice. Check out the Bills.com Budget Guide and Financial planning guide. They will help you manage your finances as well as teach you how to budget and be prudent when managing your finances.
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