Articles Posted in PayDay Lenders

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I recently wrote about some of the abuses of Pay Day or Title Loan companies when they collect debts and a natural question is “WHY” do they do this? Or why do they think they can get away with it?

First, most of these lenders are not considered debt collectors so they are not controlled by the Fair Debt Collection Practices Act (FDCPA). Thus, they think they can get away with all sorts of high-handed abuse towards consumers. They have forgotten about Alabama state law – such as invasion of privacy, false imprisonment (when they block your driveway), and other similar causes of action.

Second, all of these agreements have arbitration provisions in them and the thought among most consumers (and frankly lawyers also) is a consumer can’t win in arbitration. To be clear – I do not like arbitration or more specifically I don’t like mandatory arbitration. But it is possible to win in arbitration.

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We are seeing more and more clients who are suffering from some of the most outrageous forms of collection abuse. And the abuse is not coming from debt collectors or debt buyers. It is coming from pay day lenders and title loan companies.

I will follow up with more information and with some videos but I wanted to give you an idea of some of the abuses consumers in Alabama are facing from these companies.

First, third party contacts are an absolute favorite of pay day lenders. Normally these lenders require “references” – family and friends – and when the consumer is late all of the references start getting harassed. The calls are not subtle – instead they demand that the brother, or neighbor, or parent make the consumer pay the loan or the calls will continue. All of the details of the loan are revealed to the third party in order to invade the privacy of the consumer.

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Pay day loans are almost always bad for consumers – in part because if you do business with people who will charge the types of outrageous rates that pay day lenders charge you can expect that they will violate laws when it comes time to collect the debt. The FTC has a special report out on pay day loans – we highly recommend that you read it. Here is an excerpt:

A payday loan – that is, a cash advance secured by a personal check or paid by electronic transfer is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The check casher or payday lender agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing for 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

If you are dealing with a pay day loan and have questions or if you are dealing with harassment from the pay day lender or the pay day lender’s collection agency, let us know and we will be glad to help you understand your options.

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We ran across this recent article titled “Social Insecurity: High-Interest Lenders Tap Elderly, Disabled” in the Wall Street Journal detailing how payday lenders have been targeting the elderly and disabled. This isn’t something that is happening just in other parts of the country. The story was out of Dothan, Alabama and shows how Alabama’s elderly and disabled have been targeted.
Payday lenders charge rates that would make some loan sharks blush and this article shows how they are targeting our elderly. We all need to be on the guard against this type of activity but particularly those of us who have elderly family and friends who might fall prey to this type of activity.

Another resource for you is to join our Facebook Fan Page – Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

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