Do I have to pay back an illegal loan?

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.

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.

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

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

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. :)

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.

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.

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.

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.

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.

You will find the Payday loan laws for Minnesota here (just select your state),
http://www.debtconsolidationcare.com/paydayloan/explain-pdls-laws.html

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.

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

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.

I agree. No one gives free money away.

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.

LLW do you have 247Advances.com admin contact info? I heard they are same as 365fastcash.com. They seem to just switch names from time to time. :?

See, paying them back what you borrowed does 3 very helpful things:

1. The company cannot accuse you of fraud or trying to steal their money, as you paid back what you borrowed.

2. If they do try and sue you, the judge will see that you did the right thing and were not trying to avoid your debts.

3. It takes away from these companies their fight. They claim they must charge such high rates because so many people don't pay them back. If everyone paid back what they borrowed, then they'd have no fight.

Goudah, so then just pay back the principal since they are illegal and unlicensed. Correct?

Again that is a very helpful point Goudah. I just could not sleep knowing I did not pay any outstanding debts. LEGAL or NOT LEGAL.

anyaroberts. . .try this. . . .247advances (@) redalto.com

Cool. Thanks my friend :P

anyaroberts. . try this for 356fastcash.com. . . . luca.mueller1 (@) gmail.com

Both of these have admin contacts out of US. One is Australia and the other is Germany. I can't promise that these will get your anywhere, or even a response, but that is how I got in touch with the Administrator for Star Advance.

Ok I will try them both. I will keep you posted if it works. Thanks again.

Yes, guest - Just pay them back what you borrowed.

some states as said above, state directly that illegal payday loans are not enforceable and uncollectable. One such state is Washington, where a fact sheet from DFI answers the question, do I have to pay back an illegal loan, the answer: No, not legally, but you may do whatever you feel morally obligated to do. That is the specific tenent of this thread. Do what you are legally required to do, and then act according to your moral code.