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Guest · Posted: Mon Jul 21, 2008 9:27 am Subject: Do I have to pay back an illegal loan?

I have a loan from E-Paydayloan. I found out they were illegal and unlicensed. Does that mean I legally have to pay them back? Thanks.

Posted: Mon Jul 21, 2008 9:38 am Subject:

Hello Guest,
If your PDL is ILLEGAL, most would agree you are morally obligated to pay back the principal borrowed. I would send them a money order for principal amount and be done with them.

Posted: Mon Jul 21, 2008 9:41 am Subject:

It depends on your state - Some state's you legally have to pay back the principle, it's not just morals.

Also, not paying back at least the principle could possible give the company cause to charge you with fraud. NOTE - This is only in cases where the loan was taken out and no payments made.

Guest · Posted: Mon Jul 21, 2008 9:43 am Subject:

State is Minnesota. Also, how can I be charged with fraud when the company charging me with it is illegal and unlicensed.

Posted: Mon Jul 21, 2008 9:44 am Subject:

To clear this up what state are you in? Also have you paid back anything in fees towards this loan?

Posted: Mon Jul 21, 2008 9:46 am Subject:

I am just curious, how can an illegal company take you to court? Wouldn't the fact that they aren't licensed to lend make the contract null and void. I am not advocating NOT paying back a loan, I just want to be clear about this. Smile

Posted: Mon Jul 21, 2008 9:46 am Subject:

First off - MN companies don't need to be licensed in MN and don't need to follow MN laws.

Second - If you defraud anyone, legal or not, you could still be charged. Just because I rob a drug dealer doesn't mitigate my crime.

Posted: Mon Jul 21, 2008 9:47 am Subject:

Nope, there are many pdl's that do take people to court, and they are illegal. They bank on people not knowing better.

And as far as the fraud, it wouldn't matter if the company was legal or not, if you intentionally defraud them it's a crime.

Posted: Mon Jul 21, 2008 9:48 am Subject:

Also, it depends on state law wether the contract is null and void. In some state's it is, and in other's it isn't.

It would all depend on the judge. It is entirely possible that a judge could rule in the pdl's favor.

Posted: Mon Jul 21, 2008 9:48 am Subject:

I don't know about the fraud thing, but personally, I repaid what was deposited into my account with two exceptions. UsFastCash gave me a PIF with $30 still remaining on my account. . .their decision. Star Advance gave me a PIF with $293 still remaining on my account. . . .again, their decision. Their Administrator felt that even though I offered to pay, the amount of aggravation that they gave me trying to get that payment to them, was payment enough. She forgave the loan immediately. So yes, morally, you should pay what they gave you.

Posted: Mon Jul 21, 2008 9:49 am Subject:

That is a good question? I have been threatened with fraud and garnishment by an ILLEGAL PDL beacause I challenged there legality and licensing. Some use this as a scare tactic to collect.

But if you take a PDL from a company itentionally knowing you are not going to pay. That is fraud. They would have to prove that on their end. In addition, if you give misleading information on your loan app to these companies that also can be dangerous.

Posted: Mon Jul 21, 2008 9:50 am Subject:

I agree - I'm talking about people intentionally taking out a loan without the intent to pay. Even though it's an illegal company, that doesn't mitigate their fraud. They could still be charged and prosecuted. That is not saying that this applies to this case, but I don't want people to get the idea that they can take out an illegal loan and not pay it back and get off scott free.

Posted: Mon Jul 21, 2008 9:50 am Subject:

Minnesota doesn't require out of state companies lending over the internet to be licensed or follow the laws posted above.

Posted: Mon Jul 21, 2008 9:51 am Subject:

Emails to and from the MN Banking Dept:

From:
Sent: Monday, March 26, 2007 3:44 PM
To: Financial.Commerce(at)state.mn.us
Subject: Payday loan questions

Hello,

I have a question about internet payday loans. Do these need to be licensed in MN to be legal? Also, how do I calculate the legal amount of interest they can charge me according to MN laws? I see the laws state:

Maximum Finance Rate and Fees: $5.50: $0-$50; 10%+$5: $51-$100; 7% (min. $10) + $5: $101-$250; 6% (min. $17.50) + $5: $251-$350 (After default: 2.75% per month)
Finance Charge for 14-day $100 loan: $15
APR for 14-day $100 loan: 390%

So for a $300 loan how would I calculate the interest? And since no rollovers are allowed and the companies I have loans with have rolled them over countless times, would I be correct in saying that they are breaking the law? I've been told by several of them that they don't have to follow MN laws, even though they solicited me, because they are licensed in the state that they are located in. Is that correct?

I really appreciate any help or direction you could give me!

Thanks!

Response:

From: Terry Meyer
Sent: Tuesday, March 27, 2007 6:40 AM
To:
Subject: FW: Payday loan questions

First we don’t license lenders that are domiciled in other states. Minnesota law does not have a long arm statute and allows residents to seek loans wherever they want. Solicitations via the internet or ads do not place the lender in Minnesota, only a physical location would [the exception being residential mortgage lenders].

The way to calculate the APR for a 14 day loan is either using a T-I calculator. A fast check using the example for a $100 14 day loan is;
$15 finance charge divided by the $100 loan [proceeds of the loan, or amount financed] = .15, or 15%
.15 divided by the number of days in the loan, or 14, gives you the daily rate of .0004109589
Multiply that number by 365 [days in the year] = 3.91071428415, or 391.07% APR

Does that help – and in Minnesota rollovers or refinancing is not permitted. Name the MN lender and file a complaint.

Reply:

From:
Sent: Tuesday, March 27, 2007 8:45 AM
To: Terry Meyer
Subject: FW: Payday loan questions

Terry,

So to make sure I understand this, a payday loan company located in another state doesn't have to be licensed to lend to MN consumers. But do they have to follow MN laws about rollovers and interest? Or can they follow the laws of the state in which they are located in?

Thanks for you help!

Response:

From: Terry Meyer
Sent: Tuesday, March 27, 2007 6:58 AM
To:
Subject: RE: FW: Payday loan questions

It is similar to credit cards – I would bet, assuming you are a MN resident, that none of your credit cards are from banks located in MN. The Supreme Court ruled in both 1978 that rates, and 1996 that fees could be imported for credit cards issued by out of state lenders to other states borrowers. Its agency law. The use of the laws of the state in which the lender is licensed is required.

Please explain your interest and the firm you represent.

Reply:

From:
Sent: Tuesday, March 27, 2007 9:04 AM
To: Terry Meyer
Subject: RE: FW: Payday loan questions

Terry,

I don't represent any firm. I was just trying to get some more information about the laws governing these kind of loans. The reason I was curious about the specific point of if state law governs out of state pdl's is because where I live, Oregon, they do have a law saying that out of state pdl's much be licensed in OR and follow the laws of OR. I was hoping the same thing applied to MN, because in that case all his pdl's were grossly overcharging him.

Thanks!

Response:

From: Terry Meyer [
Sent: Tuesday, March 27, 2007 7:30 AM
To:
Subject: RE: RE: FW: Payday loan questions

Good luck – we recently received a complaint on a Payday loan from Malta. Since MN doesn’t have a law like OR each state would have to be contacted for their payday loan law to determine if a violation occurred.

What does this mean?

There are very specific rates they can charge you depending on the amount loaned.

Rollovers are not allowed.

Internet companies can lend legally as long as they are licensed in another state. They must follow the laws of that state.

Posted: Mon Jul 21, 2008 9:52 am Subject:

I agree. No one gives free money away.

Posted: Mon Jul 21, 2008 9:53 am Subject:

This question is moot though with epayday loan because they are not licensed anywhere in the US. They are a sub of Cash Net 500, Payday Loan Yes, Global Payday.

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