If you've racked up payday loan debt and you're unable to meet the monthly payments, you may negotiate a settlement with the pdl lenders. Payday loan debt settlement enables you to get rid of your dues by allowing you to pay less than the balance you owe. With settlement, you can get out of the payday loan trap and avoid further harassment by pdl lenders and collection agencies.
How payday loan debt settlement works
You can co-ordinate with pdl lenders or collection agencies and settle your bills on your own. Make sure you know how much you owe in total. Just check your credit report to find out which bills are unpaid and whether the accounts are well past the Statute Of Limitations (SOL) period. Know how to settle your debts yourself.
In case you don't feel comfortable negotiating with lenders/CAs, you may take advantage of settlement services. Such services enroll you in a settlement program which requires you to stop paying your pdl companies so that you can save a certain amount each month. When you've accumulated enough cash for several months, the negotiator at the settlement company communicates with the lenders or CAs (whoever holds your accounts) so that they agree to accept an amount less than what you owe. Find the details on how debt settlement works and know about the pros and cons before you enroll in it.
Benefits of payday loan settlements
When you settle your pdls, you get the 3 benefits, as given below.
Pay less than what you owe
When you go for settlement, lenders/CAs would generally need you to pay up to a certain percentage of the dues you owe, and forgive the remaining balance. So, if you're in financial distress or you're in hardship, settlement can help to eliminate your dues.
Get relief from harassment by lenders/CAs
When you're in a pdl settlement program, you don't have to deal with lenders or collection agencies. That's because your negotiator manages all communication on your behalf. When lenders/CAs find you interested to pay at least a certain percentage of the balance, they're likely to stop harassing you with repeated phone calls.
Stay away from legal actions
With payday loan debt settlement, you can avoid being sued by lenders. Pdl companies may not appeal to court for a judgment against you. You can thus avoid getting a lien placed on your home or having your wages garnished.
Steps to take before going for payday loan debt settlement
You should take the following steps before getting enrolled into a payday loan debt settlement program:
Calculate the payday loan amount
First of all calculate your total payday loan amount. Gather all the documents from your files and folders and find out the names of the lenders, the amount you owe to each lender, penalties, interest rates, late fees, etc. Check whether or not you can afford to pay the loan amount on your own.
Go through your state pdl laws
Are you well acquainted with your state payday loan laws? If not, then you should know about them now. Each state has its own payday loan laws. Check whether your lender is following those rules. Know the USA payday loan laws
before paying any money to your lender. But there are some states where payday loan companies operate as Credit Service Organizations (CSOs)
to avoid the regulation of pdl laws. Some of those states where many payday loan companies operate as CSOs are listed here
. To know more on payday loan companies acting as CSOs, you can read this information
Check the license of your lender
Is your lender licensed to do business in your state? If not, then you can breathe easy as you won't be required to pay the interest rates and fees. You'll only need to pay the principal amount only.
Put a hard debit check on your account
If you are unable to make payments on your payday loans or your lender is illegally withdrawing money from your checking account, then you may put a hard debit check
on your account. You can also ask the branch manager of your bank to close the account. However, it is not a wise idea to do so.
Once you close your checking account, your lender may file a lawsuit against you for violating the terms and conditions of the contract. This may in turn cost you a lot of money. You'll have to spend a hefty amount for paying the attorney fees and other court-related fees.
Ways of tackling payday loan companies
- Storefront payday loan company::
If you have taken a payday loan from a store front then you have to follow the payday loan laws of your state. You can ask for an Extended Payment Plan (EPP) from the company if you are finding it difficult to pay off their debt. But there are concerns about the efficacy of such payment plans. Here are some concerns associated with EPP.
If you default payday loan then the storefront can sue you for collecting the debt. But I haven’t heard of anyone getting arrested for not paying payday loans.
- Online or internet payday loans:
If you have taken out a payday loan from an internet or online payday loan company then first check whether the company is licensed to lend in your state. To check the internet payday loan laws click here. If the company is illegal then you are not legally bound to pay them anything. But on moral grounds you can pay the principal amount of the debt borrowed from illegal pdl companies.
How to select a trustworthy payday loan settlement company
You can use the following tips to select a trustworthy payday loan debt settlement company:
Check the fee structure The first tip will be to check the fee structure of the company. Under the new settlement laws, the companies are required to charge fees in proportion to the settled debt amount. So, if you find that the settlement company is not following this rule, then it will be wise to not do business with them.
Check the certifications
Check whether the debt negotiators of the settlement company are certified by IAPDA
. The debt negotiators can get IAPDA certifications only when they have sufficient knowledge on the settlement laws.
Watch out for the affiliations
An important tip to select a good settlement firm will be to check whether they are affiliated with organizations like TASC, BBB
, etc. You should also find out whether the company is a member of United States Chamber of Commerce
Check the performance of the company Make sure you work with a settlement company that has good success rate. Visit the official website of the company to gather information about the company. Go through the "testimonials" section (if they have any) and know whether the clients are happy with their services.
Find out if they offer service guarantee Find out whether the settlement company offers any service guarantee to their clients. If yes, then check the type of assistance they will provide you if the settlement does not work out to relieve your debt burden. Check whether the company will refund your fee if they fail to settle your payday loan debts.
Consult your family You can always go to your family members and ask their opinion about the settlement company you're considering to work with. You can also ask them to recommend you a good settlement company in your state.
Apart from the above mentioned points, you should check whether the company follows the new settlement laws enacted by Federal Trade Commission. For instance, under the new laws, the settlement company can't charge fee prior to settling at least one account of the consumer. They can't also make false claims about their services. You should work with the settlement company that follows all the rules and regulations.
3 Signs to help you detect payday loan debt settlement scam
The following signs can help you detect a payday loan debt settlement scam if the company:
1 Refuse to provide you with a payment structure
If the debt negotiators refuse to tell you how they are using your money sent to them, then it is a sign of a scam. You should stop working with that company henceforth.
2 Refuse to provide you with a contract
If a settlement company calls you and asks you to make a verbal agreement with them, know for sure that it is a scam. You should not send any money to the company based on the oral agreement. Ask the company to send you a proper contract. Go through the contract and read the terms and condition. If you have no problem with the clauses, then sign the contract.
3 Guarantees to delete negative details from your credit report
A lot of scam companies promise to delete the correct negative details from the credit report to attract customers. But the truth is, the settlement companies are not entitled to do it. If a company makes such a promise to you, move on.
In spite of the fact that settlement helps consumers reduce their debt burden, there aren't many companies offering payday loan settlements. This is because the interest rates on pdls are so high and the fees add up so quickly that it gets difficult to negotiate and reduce the balance to an amount that the consumer can afford to pay. So, most debt relief companies offer payday loan consolidation programs instead of settlement. Payday loan consolidation doesn't help to reduce the principal debt balance but it lets you obtain low rates of interest on your pdls. Moreover, the consolidator negotiates with your pdl lenders to cut down or eliminate late payment fees incurred on your accounts. The best thing about pdl consolidation is that you can clear your bills with a single monthly payment instead of making several payments each month.
Real life scenarios
Due to a severe financial problem, I was forced to take out loans from Amplify Funding. However, I was only paying interest since the interest rate was too high, about 800%. The principal amount was $1000. However, I have come to know that the loans of Amplify Funding are illegal and I am obligated to pay only the principal. I live in Tennessee. Does this apply to me? I have revoked th ACH authorizations. The company is threatening to call me at workplace. How should I deal with it?
Solution: The company Amplify Funding usually charges interest if you’re not able to repay the loan on time. Also, they are now willing to refund you the extra amount (more than the principal amount) you pay since it’s an illegal payday loan. You are supposed to pay just the principal amount since it is illegal in Tennessee.
Now, how you will deal with an illegal payday loan if you have paid extra.
First of all, revoke the ACH (Automated Clearing House) authorization and send them a Cease and Desist letter. Also, ask to refund the extra amount. If they don’t agree, you can threaten them to approach the state attorney general if they refuse to give you a refund that you have paid extra, that is, more than the principal amount.
Also, If threatening you, you can file a complaint since its against FDCPA (Federal Debt Collection Practices Act).
Is Radiant Cash legal in PA? They are calling it an installment loan. However, actually I haven’t taken out any loan from them. But, they are taking money from my account. What to do.
Solution: How did they get authorization to take out money from your account? First of all, contact your bank and verify it asap. Check out the ACH authorization with your bank. Immediately revoke it by mailing to your bank.
Now, how you will deal with an illegal payday loan if you have paid extra.
However, tribal lenders often credit money into account. So, check out whether they had credited any amount into your bank account earlier.
I have multiple loans through a place called King of Kash. They are not a payday loan lender but are called signature loan lender. They did not run my credit and provided me with an unsecured loan. I live in Missouri. I am trying to get help because I have been paying them $600 every month for almost a year. Originally I borrowed $2000 and have paid over $3000 and they still want about $4000. I had to close my checking account. Now, they’re calling and threatening me. I need advice what to do.
Solution: It is better if you settle the debt. You can do it yourself or take professional help. But before you do that, check with the SoS in your state that whether or not they’re in compliance with your state laws. If not, then this loan will become null and void.
Once a Florida judge determined that a person was providing payday loans to people while unknowingly in violation of that state’s business registration laws; the judge cancelled out all the loans he provided till that date. The means, he couldn't collect a cent from any of the customers anymore.
Therefore, go through your loan documentation and check what it says.
It might also be that the company has charged you more interest than what the usury law allows in your state. They may also have broken the contract by demanding so much extra from you. Since you live in Missouri, you might have a look at Missouri Revised Statutes Section 408. The law in your state states that the maximum interest rate a lender can legally charge on a personal loan is 9%. There is no way that you’re paying a legal interest rate on a $2000 loan, even if it’s a signature loan, when you've been paying all that money and they still want $4000 more! You have said that you’ve been paying for almost a year; well, in that case, you might have already paid around $7200 (600 x 12 months = $7200).
So, cancel your ACH, if any. If required, contact MO AG's (Attorney General’s) office or the MO Department of Legal Services. They cannot provide legal advice at the AG's office; the AG will take a complaint from you and investigate it but it’s better if you call Legal Services first.