Frequently Asked Questions
How do cash advances work?
First, you fill out a short application form, providing your personal information (name, address, date of birth, etc.) After getting an approval, you sign a contract with your payday lender. Because of the Truth in Lending Act (TILA) requirements, there can be no hidden fees or hidden terms in your contract. Under TILA, the contract should clearly state the terms of the agreement, the full sum of money required for repayment, and the APR that applies to the amount borrowed.
If you apply online, the money you borrow will be deposited into your account. It may take a few days for the money to appear. You will normally need to give your payday lender a check, post-dated for when your repayment is due. The lender will then hold that check until an agreed-upon repayment date, which typically falls around your next payday.
How do I pay back?
Payday loan repayment terms depend on whether the borrower applies online or in-store. For online payday loans, you will pay back with a pre-authorized electronic withdrawal from an active account for the cash sum borrowed and the stated payday loan fee. For in-store payday loans, you can return to the store on the scheduled due date to repay the loan for the amount borrowed and the stated payday loan fee.
How do you choose the best payday loan provider?
Here's what you should look for in a payday advance loan provider:
- Membership in the CFSA
- Full Disclosure (meaning that all rates, terms and fees will be stated in the contract)
When making a deal with an online payday lender, always check for a physical address. Always verify that the lender has additional contact information, like a phone number and mailing address, and not just an email address. Never sign a payday loan contract until you have confirmed that you are dealing with a credible payday lender.
What are the laws regulating payday loans services?
The payday loans services are regulated by state and federal laws. However, each payday loan lender has its own set of terms and conditions in addition to state, federal and Community Financial Services Association of America (CFSA) rules. Therefore, you should learn the basics about your cash advance lender, so that you know exactly what policies it upholds.
What happens when I miss a payment on my payday loan?
If you refuse to repay your due payday loan, or if you simply cannot pay, your payday loan lender can take several courses of action. First of all, the lender will most likely charge late fees.
Secondly, the lender will turn your account over to a collection agency. The agency will then be in charge of collecting the balance from you in full.
The other thing the lender can do is go to court because you haven't fulfilled your obligations. When you apply for a loan, you sign paperwork that indicates your promise to repay it. This document is legally binding. You will normally be responsible for court fees.
Can I be taken to court for a payday loan?
Yes. If a payday loan company lends you money, then you are legally obligated to pay them back by signing a payday loan contract.
However, this process can be complicated depending on state laws and the manner in which the borrower obtained the payday loan. For example, a borrower who obtained a payday loan online, yet lives in a state in which payday lending is illegal, probably doesn’t have to repay the debt, despite the lender’s protests. This is because the lending of the loan itself was illegal.
On the other hand, if a borrower lives in a state where payday lending is legal and borrowed money from a lender within the state that allows payday loans, then the borrower will be held liable for the amount owed.
Is it against the law to have more than two payday loans?
It all depends on the state law. Some state laws have a set maximum of how many payday loans you can have outstanding at one time.
How do I get debt collectors to quit calling me?
First of all, you can simply request that the collector stops contacting you. You should do this by writing a letter in addition to telling them that over the telephone. Be sure to keep a copy of the letter for your own records.
When the agency receives the letter, they should not contact you again except to tell you if they are going to take specific action concerning the debt. Also remember that according to the Fair Debt Collection Practices Act (FDCPA), a debt collector may not harass a person for the collection of debt with the “use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.” If any of that happens to you, you record the call and file a complaint, supporting it with hard evidence.
Why are payday loans illegal in some states?
Some states have abnormally high interest rates and a horrible statistic of how many people cannot repay their payday loans. This is why some state governments outlaw payday lending as a whole.
What is the APR of my payday loan?
Annual Percentage Rate = ((F/T)*365)/ (the term of the loan in days), where F represents your loan fees and T is the total amount of the loan. For example, if you take out $300 for 7 days, and owe $50 in fees, the math would be: ((50/300)*365)/ (7) = 0.1666*365/7 = 8.687 or 86.87 percent.
Can a payday loan company contact my employer?
A payday loan company can contact your employer, but the company is always limited as to the amount of information it can legally reveal. Payday loan lenders are allowed to call your employer to verify that the job you claim is legitimate and that your monthly income is as described on the payday loan application. Anything beyond employment and income verification is illegal.
How do I find out my state’s payday loan laws?
You can research payday loans service laws by researching bills through your states’ general assembly websites, which list bills and pending legislations. Unfortunately, this is a very long and monotonous process. You can save time by just visiting the National Conference of State Legislature’s website (NCSL). It monitors state laws and contains all current payday lending laws and regulations per state. It also lists the states, in which they are prohibited. The NCSL also keeps up-to-date on developments in payday lending legislation.
Information on state laws can also be found at payday lending trade associations. For example, The Financial Service Centers of America (FISCA) publishes a list of state laws governing payday advances.
Can I apply for a payday loan in another state?
In most cases, it is legal to seek out-of-state payday loans. However, while some states have very relaxed laws concerning short-term lending, you should be aware that some states heavily regulate or outright ban payday loans at payday loan retail stores altogether.
There are few laws that prevent individuals from seeking loans that are offered by payday lenders in another state. States that ban payday loans within their territory do not forbid or in-person obtaining of a payday loan in another state. If you obtain a loan from a retail lender in another state, you must take into consideration that the laws governing that transaction are based on the laws of the state where the loan was issued, and not from the state where you currently reside.