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32 Payday Loans Questions and Answers

A payday lender told me it doesn’t make loans to consumers in my state. Aren’t payday loans available everywhere?

No. For example, payday lending storefronts are not present in certain states. The loans are either not permitted by law, or the lenders choose not to do business in those states rather than abide by the states’ regulations. You can check with your state regulator to find out whether payday lenders operate in your state.

Is applying for a payday loan online safe?

Any time you give out your sensitive personal and financial information on the Internet there are risks. If you apply for payday loans online, you could be increasing that risk several times over.

That’s because many websites that advertise payday loans are not lenders. They are businesses known as “lead generators,” which make money primarily by finding customers for lenders.

Lead generators will collect your information – including your Social Security and checking account numbers – and then send your request for a payday loan to a network of lenders. Your application will then be sold to the lender that offers to make you a loan. However, that may not stop other lenders or other service providers from calling or emailing you.

Lead generators might not find you the lowest cost loans, and you should be cautious of sites that promise they will. Many consumers can also be confused about who actually made the loan, which makes getting help when you need it harder.

Tip: Key phrases can help you spot a lead generator. It can be hard to tell if the website you click on is a lead generator or an actual lender. Lead generators might disclose that they are not lenders somewhere on their site, but this information can be hard to find. In addition, look for phrases like: “matching you with lenders,” “connecting you with a network of participating lenders,” or something similar, as an indication that you are on a lead generator’s site.
 

Can I end my "ACH authorization?”

Under the rules governing the ACH system for electronic withdrawals from consumer accounts, a valid “ACH authorization” must state clearly how it can be revoked (ended). All lenders using the ACH system agree to abide by these rules.

You should not sign an ACH authorization that does not say clearly how you can revoke it. If you have signed an authorization that does not contain instructions on how to revoke it, you may have a right to tell your bank or credit union to reverse any account debits that the lender made based on that authorization .

Can a payday lender garnish my wages?

Your wages usually can be garnished only as the result of a court order.

If you don’t repay your loan, the payday lender or a debt collector generally can sue you to collect. If they win, or if you do not dispute the lawsuit or claim, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the lender or collector to get a garnishment order against you.

Wage garnishment happens when your employer holds back a portion of your wages for your debts. If a payday lender attempts to garnish your wages without going through the legal process described above, notify the payroll department at your employer of this and contact your state's attorney general office. You may also contact a legal aid attorney for assistance.

Tip: Don't hide from bad news. Don’t ignore a lawsuit summons or other notices from a court or the lender, or the initial court proceedings against you. If you do, you could lose the opportunity to fight a wage garnishment or it could become much more difficult to do so.

Does everyone pay the same amount for a payday loan, or will the cost depend on things like how much money I make?

Typically, a payday lender will charge every customer the same rate for a payday loan. Payday lenders generally charge a fixed price for every $100 borrowed. Many states cap the charges at specific maximums and lenders may occasionally offer discounts, but in general these fees range from around $10 to $30 per $100 borrowed.

While the cost to borrow may not vary, your income may determine how much you can borrow. Many states set limits on maximum loan amounts, but – depending on your income and other factors – a lender may not offer you the maximum amount.

How can I stop a payday lender from electronically taking money out of my bank or credit union account?

There are three things to consider when faced with this problem. First, do you think the transfer from your account is unauthorized (that is, you did not give permission or the lender is going beyond what you initially gave permission for)? Second, do you want to stop one or more payments out of a series you actually did authorize? Third, do you want to completely revoke (cancel) your authorization?

Unauthorized transfers

If you think that your payday lender is withdrawing more money from your checking account than you authorized, you should tell your bank or credit union that you are having trouble with “unauthorized transfers.” If anyone takes money out of your account without authorization, federal law requires the bank or credit union to take steps to stop that problem after you give them proper notice.

Stopping a series of transfers

You have some additional protections if your loan agreement calls for you to make regular electronic payments at repeated intervals, such as loans that are repaid through installments, and payday loans that are automatically set up to renew a certain number of times. You can stop one of a series of regularly scheduled payments by giving your bank or credit union oral or written notice at least three business days before the transfer is scheduled. The bank or credit union may require written confirmation of oral notice. They may charge fees for a stop payment.

Cancelling authorization

Under rules that all banks, credit unions and lenders agree will govern electronic transfers, you can also revoke any authorization that you gave a payday lender to take money out of your account. You should follow the instructions in the initial authorization that describe how to tell the payday lender to stop. If there are no instructions on how to tell the lender to stop, then the authorization may be completely invalid – but you should still tell the lender to stop taking money from your account. Specifically, you should say: “my authorization to debit my account is revoked." You must send these instructions to your lender in writing. You should also keep a copy to take to your bank or credit union. Then tell your bank or credit union that any further transfers are “unauthorized” and you want them treated that way – either stopped or immediately refunded. If your bank or credit union does not follow your instructions, you should contact the CFPB .

How can I tell if a payday lender is licensed to do business in my state?

You may never know unless you ask. Many states have consumer protection laws that apply to payday loans. But lenders that are not licensed to do business in your state might not follow those rules or offer you other protections required by your state. Some online payday lenders might not even be located in the U.S. Some payday loans offered online might not be legal in your state.

If you want to know whether a lender is licensed to do business in your state, verify the information with your state banking regulator or attorney general.

How do I find my state's bank regulator?

Alabama

Regulator: Alabama State Banking Department
Address: P.O. Box 4600 Montgomery AL 36103
Phone: (334) 242-3452
Fax: (334) 353-5961
Website: www.bank.state.al.us/
Complaint Instructions

Alaska

Regulator: Alaska Division of Banking and Securities
Address: P.O. Box 110807 Juneau AK 99811
Phone: (888) 925-2521
Fax: 907-269-8146 (Anchorage); 907-465-1231 (Juneau)
Website: http://www.commerce.state.ak.us/bsc/
Complaint Instructions

Arizona

Regulator: Arizona Department of Financial Institutions
Address: Financial Enterprises Division, 2910 N. 44th Street, Suite 310 Phoenix AZ 85018
Phone: (800) 544-0708
Fax: (602) 381-1225
Website: http://azdfi.gov/
Complaint Instructions

Arkansas

Regulator: Arkansas Attorney General
Address: Office of the Attorney General
323 Center Street, Suite 200
Little Rock, Arkansas 72201
Phone: (501) 682 2007
Website: http://www.ag.arkansas.gov/
Complaint Instructions

California

Regulator: California Department of Corporations
Address: Financial Services Division, 1515 K Street, Suite 200 Sacramento CA 95814
Phone: (866) 275-2677
Website: www.corp.ca.gov/
Complaint Instructions

Colorado

Regulator: Colorado Office of the Attorney General
Address: Uniform Consumer Credit Code, 1525 Sherman St., 5th Fl. Denver CO 80203
Phone: (303) 866-4494
Fax: (303) 866-5691
Website: http://www.coloradoattorneygeneral.gov/
Complaint Instructions

Connecticut

Regulator: Connecticut Department of Banking
Address: 260 Constitution Plaza Hartford CT 06103
Phone: (860) 240-8299
Fax: (860) 240-8167
Website: http://www.ct.gov/dob/site/default.asp
Complaint Instructions

Delaware

Regulator: Delaware Office of the State Bank Commissioner
Address: 555 E. Loockerman Street Suite 210 Dover DE 19901
Phone: (302) 739-4235
Fax: (302) 739-3609
Website: http://banking.delaware.gov/
Complaint Instructions

District of Columbia

Regulator: D. C. Department of Insurance, Securities and Banking
Address: 810 First Street, NE Suite 701 Washington DC 20002
Phone: (202) 727-8000
Fax: 202-535-1194
Website: http://disb.dc.gov/
Complaint Instructions

Florida

Regulator: Florida Office of Financial Regulation
Address: Division of Securities and Finance, 200 E. Gaines Street Tallahassee FL 32399
Phone: (850) 410-9805
Fax: (850) 410-9748
Website: http://www.flofr.com/
Complaint Instructions

Georgia

Regulator: Georgia Office of the Commissioner of Insurance
Address: Industrial Loan Division, Two Martin Luther King, Jr. Drive West Tower, Suite 704 Atlanta GA 30334
Phone: (404) 656-2070
Fax: (404) 657-8542
Website: http://www.gainsurance.org/
Complaint Instructions

Hawaii

Regulator: Hawaii Department of Commerce and Consumer Affairs
Address: Consumer Resource Center, 235 S. Beretania Street, Rm 801 Honolulu HI 96813
Phone: (808) 587-3222
Fax: (808) 586-2640
Website: http://cca.hawaii.gov/
Complaint Instructions

Idaho

Regulator: Idaho Department of Finance
Address: Consumer Finance Bureau, 800 Park Blvd., Suite 200, Boise ID 83712
Phone: (208) 332-8000
Fax: (208) 332-8096
Website: http://finance.idaho.gov
Complaint Instructions

Illinois

Regulator: Illinois Division of Financial Institutions
Address: Consumer Credit Section, 320 W. Washington Springfield IL 62701
Phone: (888) 298-8089
Website: http://www.idfpr.com/DFIdefault.asp
Complaint Instructions

Indiana

Regulator: Indiana Department of Financial Institutions
Address: 30 South Meridian Street, Suite 300 Indianapolis IN 46204
Phone: (800) 382-4880
Website: http://www.in.gov/dfi/
Complaint Instructions

Iowa

Regulator: Iowa Division of Banking
Address: 200 East Grand Avenue, Suite 300 Des Moines IA 50309
Phone: (515) 281-4014
Fax: (515) 281-4862
Website: http://www.idob.state.ia.us/
Complaint Instructions

Kansas

Regulator: Office of the State Bank Commissioner
Address: 700 SW Jackson, Suite 300 Topeka KS 66603
Phone: (785) 296-2266
Fax: (785) 296-0168
Website: http://www.osbckansas.org/
Complaint Instructions

Kentucky
Regulator: Kentucky Office of Financial Institutions
Address: 1025 Capital Center Drive, Suite 200 Frankfort KY 40601
Phone: (800) 223-2579
Fax: (502) 573-8787
Website: http://www.kfi.ky.gov/Pages/default.aspx
Complaint Instructions

Louisiana

Regulator: Louisiana Office of Financial Institutions
Address: P.O. Box 94095 Baton Rouge LA 70804
Phone: (225) 925-4660
Fax: (225) 925-4548
Website: www.ofi.state.la.us/
Complaint Instructions

Maine

Regulator: Maine Office of Consumer Credit Regulation
Address: Department of Professional and Financial Regulation, 35 State House Station Augusta ME 04333
Phone: (207) 624-8527
Fax: (207) 582-7699
Website: http://www.maine.gov/pfr/consumercredit/index.shtml
Complaint Instructions

Maryland

Regulator: Maryland Commissioner of Financial Regulation
Address: 500 North Calvert Street Suite 402 Baltimore MD 21202
Phone: (410) 230-6100
Fax: (410) 333-3866
Website: http://www.dllr.state.md.us/finance/
Complaint Instructions

Massachusetts

Regulator: Massachusetts Division of Banks
Address: One South Station Boston MA 02110
Phone: (617) 956-1500
Fax: (617) 956-1599
Website: http://www.state.ma.us/dob
Complaint Instructions

Michigan

Regulator: Michigan Office of Financial and Insurance Regulation
Address: P.O. Box 30220 Lansing MI 48909
Phone: (877) 999-6442
Fax: (517) 335-4978
Website: http://www.michigan.gov/difs
Complaint Instructions

Minnesota

Regulator: Minnesota Department of Commerce
Address: Division of Financial Examinations, 85 7th Place East, Suite 500 St. Paul MN 55101
Phone: (651) 296-2135
Fax: (651) 296-8591
Website: http://mn.gov/commerce/
Complaint Instructions

Mississippi

Regulator: Mississippi Department of Banking and Consumer Finance
Address: 901 Woolfolk Building, Suite A 501 N. West Street Jackson MS 39201
Phone: (601) 359-1031
Fax: (601) 359-3557
Website: http://www.dbcf.state.ms.us/
Complaint Instructions

Missouri

Regulator: Missouri Division of Finance
Address: Consumer Credit Section, P. O. Box 716 301 W. High Street Jefferson City MO 65102
Phone: (573) 751-3242
Fax: (573) 751-9192
Website: http://finance.mo.gov/
Complaint Instructions.

Montana

Regulator:  Division of Banking and Financial Institutions
Address: 301 South Park, Suite 316, Helena, MT 59601
Phone: (406) 248-2742
Website: http://www.banking.mt.gov/default.mcpx
Complaint Instructions

Nebraska

Regulator: Nebraska Department of Banking & Finance
Address: Financial Institutions, 1230 'O' Street, Suite 400 P.O. Box 95006 Lincoln NE 68509
Phone: (402) 471-2171
Website: http://www.ndbf.ne.gov/index.shtml
Complaint Instructions

Nevada

Regulator: Nevada Financial Institutions Division
Address: 2785 E. Desert Inn Rd., Suite 180 Las Vegas NV 89121
Phone: (702) 486-4120
Fax: (702) 486-4563
Website: http://www.fid.state.nv.us/
Complaint Instructions

New Hampshire

Regulator: New Hampshire State Banking Department
Address: 64B Old Suncook Road Concord NH 03301
Phone: (603) 271-3561
Fax: (603) 271-0750
Website: http://www.nh.gov/banking/
Complaint Instructions

New Jersey

Regulator: New Jersey Department of Banking and Insurance
Address: 20 West State St. Trenton NJ 08625
Phone: (609) 292-5360
Fax: (609) 292-5461
Website: http://www.state.nj.us/dobi/index.html
Complaint Instructions

New Mexico

Regulator: New Mexico Financial Institutions Division
Address: 2550 Cerrillos Road, 3rd Floor P. O. Box 25101 Santa Fe NM 87505
Phone: (505)476-4885
Fax: (505) 476-4670
Website: http://www.rld.state.nm.us/financialinstitutions/
Complaint Instructions

New York

Regulator: New York State Banking Department
Address: One State Street New York NY 10004
Phone: 1-877-BANK-NYS
Website: http://www.dfs.ny.gov/
Complaint Instructions

North Carolina

Regulator: North Carolina Attorney General (See also Commissioner of Banks)
Address: NC Attorney General's Office 9001 Mail Service Center Raleigh NC 27699-9001
Phone: (919) 716-6400
Website: www.ncdoj.com
Complaint Instructions

North Dakota

Regulator: North Dakota Department of Financial Institutions
Address: 2000 Schafer Street, Suite G Bismarck ND 58501
Phone: (701) 328-9933
Fax: (701) 328-0290
Website: http://www.nd.gov/dfi/
Complaint Instructions

Ohio

Regulator: Ohio Division of Financial Institutions
Address: 77 South High Street, 21st Floor Columbus OH 43215
Phone: (614) 728-8400
Website: http://www.com.ohio.gov/fiin/
Complaint Instructions

Oklahoma

Regulator: Oklahoma Department of Consumer Credit
Address: 4545 North Lincoln Boulevard, Suite 104 Oklahoma City OK 73105
Phone: (405) 521-3653
Fax: (405) 521-6740
Website: http://www.ok.gov/okdocc/
Complaint Instructions

Oregon

Regulator: Oregon Department of Consumer & Business Services
Address: Division of Finance & Corporate Securities, 350 Winter St. NE, Rm. 410 Salem OR 97301
Phone: (503) 378-4140
Fax: (503) 947-7862
Website: www.oregondfcs.org
Complaint Instructions

Pennsylvania

Regulator: Pennsylvania Department of Banking
Address: Market Square Plaza, 17 N. Second Street Harrisburg PA 17101
Phone: (717) 214-8343
Fax: (717) 787-8773
Website: http://www.banking.state.pa.us/portal/server.pt/community/banking_home/14319
Complaint Instructions

Rhode Island

Regulator: Rhode Island Department of Business Regulation
Address: Division of Banking, 233 Richmond Street, Suite 231 Providence RI 02903
Phone: (401) 222-2405
Fax: (401) 222-5628
Website: http://www.dbr.state.ri.us/
Complaint Instructions

South Carolina

Regulator: South Carolina State Board of Financial Institutions
Address: Consumer Finance Division, P.O. Box 11905 Columbia SC 29211
Phone: (803) 734-2020
Fax: (803) 734-2025
Website:http://www.consumer.sc.gov
Complaint Instructions

South Dakota

Regulator: South Dakota Division of Banking
Address: 217 1/2 West Missouri Avenue Pierre SD 57501
Phone: (605) 773-3421
Fax: (605) 773-5367
Website: http://www.state.sd.us/drr2/reg/bank/BANK-HOM.htm
Complaint Instructions

Tennessee

Regulator: Tennessee Department of Financial Institutions
Address: 511 Union Street, Suite 400 Nashville TN 37219
Phone: (615) 741-2236
Fax: (615) 532-1018
Website: http://www.tennessee.gov/tdfi/
Complaint Instructions

Texas

Regulator: Texas Office of Consumer Credit Commissioner
Address: 2601 N. Lamar Blvd. Austin TX 78705
Phone: (512) 936-7600
Fax: (512) 936-7610
Website:http://www.occc.state.tx.us/
Complaint Instructions

Utah

Regulator: Utah Department of Financial Institutions
Address: 324 South State Street, Suite 201 Salt Lake City UT 84111
Phone: (801) 538-8830
Fax: (801) 538-8894
Website: http://www.dfi.utah.gov/
Complaint Instructions


Vermont

Regulator: Vermont Banking Division
Address: Department of Banking, Insurance, Securities & Health Care Administration, 89 Main St Drawer 20 Montpelier VT 05620
Phone: (802) 828-3307
Fax: (802) 828-3306
Website: http://www.dfr.vermont.gov/banking/banking-division">
Complaint Instructions

Virginia

Regulator: Virginia Bureau of Financial Institutions
Address: State Corporation Commission, 1300 East Main Street, Suite 800 Post Office Box 640 Richmond VA 23218
Phone: (804) 371-9657
Fax: (804) 371-9416
Website: http://www.scc.virginia.gov/bfi/index.aspx
Complaint Instructions

Washington

Regulator: Washington Department of Financial Institutions
Address: Division of Consumer Services, PO Box 41200 Olympia WA 98504
Phone: (360) 902-8700             (360) 902-8700     
Fax: (360) 725-7827
Website: http://www.dfi.wa.gov/
Complaint Instructions

West Virginia

Regulator: Office of West Virginia Attorney General (see also Consumer Protection Division)
Address: Consumer Protection Division 812 Quarrier St., 4th Floor
Charleston WV 25301
Phone: (800) 368-8808
Fax: (304) 558-0184
Website: http://www.wv.gov/residents/Pages/ConsumerProtection.aspx
Complaint Instructions

Wisconsin

Regulator: Wisconsin Department of Financial Institutions
Address: Wisconsin Consumer Act Section, P.O. Box 8041 Madison WI 53708
Phone: (608) 261-9555
Website: http://www.wdfi.org/
Complaint Instructions

Wyoming

Regulator: Wyoming Division of Banking
Address: Uniform Consumer Credit Code, 122 West 25th Street Cheyenne WY 82002
Phone: (307) 777-7797
Fax: (307) 777-3555
Website:http://audit.state.wy.us/banking/
Complaint Instructions

How do I repay a payday loan?

If you take out a payday loan from a storefront lender, you must either provide a personal check to the lender or an ACH authorization to electronically withdraw money from your checking account. You may be required to come back to the store to repay your loan. If you do not return, your lender might repay itself by presenting your check to your bank or credit union or withdrawing funds electronically from your account.

If you have taken out a loan online, you provide an ACH authorization for the lender to electronically access your checking account for repayment on the loan due date. So, while the way you repay a loan may depend on whether you took out a loan in a storefront or online, in general, you provide the lender a way to repay itself the full amount as part of the application process. This is done either by:

  • Giving the lender permission to electronically take the money out of your checking account when the loan is due, through an ACH authorization
  • Giving the lender a check for the repayment amount that they can deposit when the loan is due

Tip: Know how your ACH payment is set up. If you gave a payday lender permission to take money directly from your checking account, it is important to know exactly how much your lender will withdraw and when.

Some lenders might set up payments assuming you only want to pay a renewal fee on the loan’s due date and require you to take action several days before your loan comes due to pay it in full. This could result in you paying several rounds of renewal fees while still owing the entire original loan amount.

Make sure you understand how your loan will be repaid and how much the loan could ultimately cost you before agreeing to use this form of credit.

How will my payday loan be paid to me?

Many lenders will offer one or more of the following options:

  • Pay you in cash
  • Electronically deposit the funds into your checking account
  • Give you a check
  • Wire funds to you
  • Put the money on a prepaid debit card

However, some of these options might carry an additional cost. If you have a preference, shop around to find a lender that will provide the money the way you want it.

TIP: Ask about added fees. Make sure you ask about any additional fees that you might have to pay for each of these options. If you are concerned that you may have been charged an additional fee illegally or that it was not properly disclosed to you, contact your state regulator or attorney general.

I am having trouble repaying my payday loan. What can I do?

If you’re having trouble repaying your payday loan, one option may be to ask your lender if it will give you an extended payment plan.

An extended payment plan lets you repay the loan in smaller installments over a longer period of time. This option may be offered for free or might carry an additional fee.

Many states require lenders to offer extended payment plans under certain circumstances, and some lenders may also do so on a voluntary basis.

If you still have trouble making payments, or are not given the option of an extended payment plan, there are other resources that may be able to help you. For example, you may wish to speak with a credit counselor in your area or contact a legal aid attorney to discuss your options.

I didn’t find out about my payday loan’s APR or when I would have to repay it until after I received the money. Shouldn’t someone tell me this ahead of time?

Your lender must disclose the annual percentage rate (APR) and other costs before you agree to the loan. If you were not given this information, your lender violated the law. You can file a complaint with your state regulator, attorney general, and the Federal Trade Commission.

The APR is information you need in order to fully understand what your loan costs and how you must repay it. It also helps you compare this option to others you may be considering.

I heard that taking out a payday loan can help rebuild my credit or improve my credit score. Is this true?

Payday loans generally are not reported to the three major national credit agencies, so it is unlikely to impact credit scores that take this data into account.

I need money now. Should I get a payday loan? What other options should I consider?

Before choosing a payday loan, take a minute to think about the costs and all your other options.

First, if you take out a payday loan, you will likely be charged a fee of between $10 and $30 for every $100 borrowed. A $15 per $100 fee is typical. So, if you have an emergency and need $300 today, you would have to pay back $345 in a couple of weeks, assuming a fee of $15 per $100 borrowed. If your budget is already tight, that may be hard to do. The payday lender may encourage you to pay just the fee and extend the loan another few weeks. In that case, you would spend $45 and still owe $345 when the extension is over – that means you’re spending $90 to borrow $300 for one month.

If you have an account at a bank or credit union, there may be less expensive alternatives available to you, especially if you have direct deposit or a stable credit history. A credit card or a pawn loan are other options.

There may be even more alternative strategies available, including those that don’t involve taking out a loan. Some employers, nonprofit organizations, and community groups offer advances or emergency credit. And don’t forget about help from family or friends.

Another option might be to negotiate with the creditor or biller about the debt or bill you owe. A smaller repayment amount at the lowest interest rate will not only help make repayment easier, it may also allow you to start saving some money for the next emergency that will come along.

Putting the $45 you would give a payday lender into a savings account every two weeks would add up to $1,170 – plus interest – in a year.

I took out a payday loan online and now need to contact them. How can I find their contact information?

Look at your loan application or any other documents you may have received from the lender. If you cannot find a way to contact your lender in these materials, visit the lender’s website to see if there is a contact form or other contact information available.  

Another potential option would be to contact your state regulator or attorney general's office to see if they have contact information for the lender you are dealing with.

I was asked to sign an “ACH authorization” for my payday loan. What is that?

An ACH authorization gives the lender permission to electronically take money from your checking or savings account when your payment is due.

Tip: Know exactly how much will be deducted from your checking account and when. Read your loan documents carefully before signing them. Make sure you understand:

  • How much would be withdrawn from your account
  • Whether it's the full amount you borrowed or a renewal fee
  • When the withdrawal would occur
  • How you can revoke, or cancel, your ACH authorization

If you don't have enough money in your account when the lender attempts a withdrawal, your bank or credit union might charge you an overdraft fee to cover the payment.

If your bank or credit union does not cover the payment and the lender can’t deduct the full amount due, your loan will be delinquent. This might result in the lender charging you a late fee, and your bank or credit union charging you a “bounced check” or non-sufficient funds fee as well.

If I take out a payday loan, could it hurt my credit?

Payday loan activity generally does not show up on the credit reports you get from the three major national credit reporting agencies (Equifax, Experian, and Trans Union). However there are specialty credit reporting agencies that collect some of your payday loan history. It is possible that lenders may access this information when considering you for future loans.

In addition, if you don’t pay your loan back and your lender sells your payday loan debt to a debt collector, it is possible the debt collector would report this debt to one of the major national credit bureaus. Debts in collection could impact your credit score.

Likewise, some payday lenders bring lawsuits to collect unpaid payday loans. If you lose a court case related to your payday loan, this fact could appear on your credit report and may affect your credit score.

If I want to take out a payday loan, do I have to put up something in return like if I went to a pawn shop?

No. Payday loans are considered a form of “unsecured” debt, which means you do not have to give the lender any collateral, or put anything up in return like if you went to a pawn shop.

Instead you will have to give the lender permission to electronically take money from your checking account, or provide a check for the repayment amount that the lender can deposit when the loan is due.

If you do not have enough money in your account when the lender tries to withdraw the payment, your bank or credit union will likely charge you fees for overdrawing your account.  

I’ve paid hundreds of dollars in fees, but the payday lender claims I still owe them money. How can this be?

If your loan is renewed rather than repaid in full on its due date, you are only paying the fees associated with keeping the original loan amount outstanding (or unpaid). Renewing by paying just the fees does not reduce the principal amount you owe.

For example, let’s say you took out a $300 loan with a $45 fee. When that loan comes due on your next payday, you will owe $345. If you are given the option to renew the loan, you’ll pay a $45 renewal fee, but still owe the full $345 on your following payday. If you keep opting to pay just the $45 renewal fee, you could end up paying hundreds of dollars in fees while still owing the original $300 you borrowed many weeks ago.

TIP: Consider repayment before taking out a payday loan. Before taking out a payday loan, it’s important to figure out whether you’ll be able to repay the full amount with a single paycheck and still have money left over to pay your other expenses, like housing, transportation, and food costs.

My payday lender says he is located in another country and therefore does not have to comply with U.S. federal laws that protect consumers. Is that true?

Generally, if you take out a payday loan online as a resident of the United States, the lender with whom you’re doing business must follow U.S. federal laws. You can report a lender who claims they do not have to do so to the Federal Trade Commission and your state attorney general.

Use caution when doing business with lenders who claim not to have to comply with U.S. laws. If you send your personal information to someone located outside the United States, they might not follow U.S. law with regards to proper storage and protection of your personal information.

My payday lender told me I could be arrested if I failed to pay back my debt. Is this true?

No, you cannot be arrested for defaulting on a payday loan. You should report the lender’s threat to your state attorney general and the Federal Trade Commission.

Nevertheless, if a lender has obtained a judgment against you and you ignore an order to appear in court, a judge may issue a warrant for your arrest. You should never ignore a court order. If you get a court order to appear, you should go to court and provide any required information. You may want to consult with an attorney to help you with your court appearance.

Is a payday lender required to offer me the lowest rate available?

No. Payday lenders are not required under federal law to offer a borrower the lowest available rate. Lenders generally offer payday loans at a fixed price. Many states cap the fees at a maximum amount, and some lenders may offer discounts in some cases. In general, payday loan prices vary from around $10 to $30 for every $100 borrowed. A fee of $15 per $100 is typical, which equates to an annual percentage rate (APR) of almost 400% for a two-week loan.

What costs and fees could I expect with a payday loan?

Payday loans generally charge a fixed fee on the amount you borrow. This fee may range from $10 to $30 for every $100 borrowed, depending on the lender and the maximum amount permitted in your state. A fee of $15 per $100 is typical, which equates to an annual percentage rate of almost 400% for a two-week loan. So, if you need to borrow $300 before your next payday, it would cost you $345 to pay it back, assuming a fee of $15 per $100.
 
If you renew or roll over your loan, you will be charged another fee and still owe the entire original balance. For example, if you pay a fee renewal or rollover fee of $45 you would still owe the original $300 loan and another $45 fee when the extension is over. That’s a $90 charge for borrowing $300 for just a few weeks.

In addition, if you don’t repay the loan on time, the lender might charge a late or returned check fee, depending on state law.

If your loan funds are loaded onto a prepaid debit card, there might be other fees you should take into consideration, such as fees to add the money to the card, fees for checking your balance or calling customer service, fees each time you use the card and/or regular monthly fees.

Be sure to read the loan agreement carefully to spot other fees and costs before you take out a loan.

What is the difference between an online payday lender and one with a storefront?

One of the main differences between getting a payday loan online versus in a store is the interaction between you and the lender.

If you take out a loan at a storefront, you may have a better idea of where you can go for help and who to contact if you have any questions or problems.

If you take out a loan online, the website you visit might not belong to the actual lender. It may belong to a lead generator that will market your loan application to a number of lenders.

Another potential difference between online and storefront payday lenders is whether they are licensed to do business in your state, and whether they follow your state’s payday lending laws.

A storefront payday lender is likely licensed in your state (although it always makes sense to check with your state regulator) but some online lenders will offer loans to people in states where they do not have a license. If a lender is not licensed by your state, it might not be following your state’s laws on payday lending.

What is the difference between a payday loan and a deposit advance?

Payday loans and deposit advances are both short-term, high-cost loans. Some of the key differences are who makes the loans, how the loan is requested, and the mechanics of how they are repaid, which are discussed further below.

Payday lenders make payday loans online or to people who visit their storefront locations. In contrast, banks and credit unions that offer deposit advances generally do so only for their customers who have accounts with them and meet certain other eligibility requirements.

A payday loan is usually due to be repaid on the borrower’s next payday, which is often two to four weeks from the date the loan was made. The specific due date is set in the payday loan agreement. The borrower can either return to the payday lender to repay the loan or allow the lender to withdraw funds from a checking account.

With deposit advance, banks and credit unions will usually pay themselves back automatically when the next electronic deposit to the customer’s account is made, regardless of source, which could be much sooner than two to four weeks. If the amount of the incoming deposit is not enough to pay back the loan, the bank or credit union will repay itself out of subsequent deposits. Typically, if any loan balance remains after 35 days, the bank or credit union will automatically charge the customer’s account for the remaining balance, even if that causes the account to become overdrawn.

Both payday loans and deposit advances charge fixed fees that are usually much more expensive than many other forms of credit. A typical two-week payday loan with a $15 fee for every $100 borrowed equates to an annual percentage rate (APR) of almost 400%.

What do I need to qualify for a payday loan?

Generally, lenders require you to:

  • have an active checking account,
  • provide proof of income from a job or another source,
  • show valid identification, and
  • be at least 18 years old.

Some lenders might employ additional criteria, such as a minimum time at your current job or a minimum amount of income to qualify for a certain loan amount.

What does it mean to renew or roll over a payday loan?

Generally, it means you pay a fee to delay paying back the loan. This fee does not reduce the amount you owe. If you roll over the loan multiple times, it’s possible to pay several hundred dollars in fees and still owe the amount you borrowed. For example, if you roll over a $300 loan with a $45 fee three times before fully repaying the loan, you will pay four $45 fees, or $180, and you will still owe the $300. So, in that example, you would pay back a total of $480.
 
Some payday lenders give borrowers the option to roll over their loans if they cannot afford to make the payment when it’s due. However, many states limit or ban payday loan rollovers.

What is a payday loan?

A payday loan – which might also be called a “cash advance” or “check loan” – is a short-term loan, generally for $500 or less, that is typically due on your next payday.

Payday loans generally have three features:

  • The loans are for small amounts.
  • The loans typically come due your next payday.
  • You must give lenders access to your checking account or write a check for the full balance in advance that the lender has an option of depositing when the loan comes due.

Other loan features can vary. For example, payday loans are often structured to be paid off in one lump-sum payment, but interest-only payments – "renewals" or “rollovers” – are not unusual. In some cases, payday loans may be structured so that they are repayable in installments over a longer period of time.

Some ways that lenders might give you the loan funds include: providing cash or a check, loading the funds onto a prepaid debit card, or electronically depositing the money into your checking account.

The cost of the loan (finance charge) may range from $10 to $30 for every $100 borrowed. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400%. By comparison, APRs on credit cards can range from about 12 percent to 30 percent.

State laws and other factors can influence how much you can borrow and the fees you are charged. Some states do not have payday lending storefronts because these loans are not permitted by the state’s law, or because lenders may choose not to do business in a state rather than abide by the states’ regulations.

There are special protections through the Military Lending Act for active duty servicemembers and their dependents who use certain payday loans and other small dollar credit products.

What should I consider if I'm thinking about getting a payday loan online?

When shopping for a loan online, consider the following:

  • Are you on a lead generator site or the site of an actual lender?
  • Is the lender’s contact information – street address, phone number, and email address – easy to find in case there is a problem later?
  • Is this lender licensed by your state? What types of laws do they claim to follow?
  • How will you repay the loan?
  • How much will it ultimately cost?
  • Is your loan set up to automatically renew several times, making it necessary to contact the lender in advance of the due date if you want to  pay off the loan?
  • Will the website protect your Social Security number, checking account number and other personal information? What are the privacy and opt-out policies? Can you restrict the site from selling your personal information?

Why did my payday lender charge me a late fee?

When you took out your payday loan, you likely gave a check to the lender, or may have given it permission to take money from your checking account when the loan was due.

If you do not have enough money in your account when the lender attempts to repay itself, your bank or credit union may cover the payment and charge you an overdraft fee. If your bank or credit union does not cover the payment, the loan will not be successfully paid and you might be charged a “bounced check” or non-sufficient funds (NSF) fee by your bank or credit union and a late fee by the lender.

Many states specify the number of times a lender can charge these types of fees and the maximum fee amount.

Will an online payday loan website find me the cheapest loan?

Many websites that advertise payday loans are not actual lenders. They are businesses known as “lead generators,” which make money primarily by findings customers for lenders. You should not depend on the lead generator to shop around for the best deal for you.

Lead generators will collect your information – including your Social Security and checking account numbers – and then send your request for a payday loan to a network of lenders. Your application will then be sold to the lender that offers to make you a loan. However, that may not stop other lenders or other service providers from calling or emailing you.

Tip: Key phrases can help you spot a lead generator. It can be hard to tell if the website you click on is a lead generator or an actual lender. Lead generators might disclose that they are not lenders somewhere on their site, but this information can be hard to find. In addition, look for phrases like: “matching you with lenders,” “connecting you with a network of participating lenders,” or something similar, as an indication that you are on a lead generator’s site. 

Will a payday lender pull my credit report before deciding whether to give me a payday loan?

Some payday lenders will pull a credit report or seek other information from major national credit agencies or specialty credit agencies before giving you a loan.

They may want to confirm your identity, or see if you have defaulted on other payday loans or recently declared bankruptcy. 




Copyright © 2013 by Mark McCracken , All Rights Reserved