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.
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:
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
- 1 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.
- 2 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:
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 conditions. If you have no problem with the clauses, then sign the contract.
It is advisable to be clear of debt myths and truthsto be sure you’re taking the right steps.
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.
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).
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.
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 Secretary of State (SOS) in your state 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.