A Review of Payday Lending In New York’s Eyes
Payday lending is allowed in thirty-two states across the country. In the remaining eighteen states, it is illegal. In one of those states, it is vehemently illegal…New York. It is a violation of New York state law to make a payday loan in person or via telephone or using the online services. It is further illegal for any creditor or debt collector to collect or even try to collect a payday loan debt. Check cashing of a post dated check, except under employment circumstances, is absolutely forbidden.
If you borrowed an illegal payday loan in New York without knowing the laws, you are not required to pay back any portion of that debt. It is considered to be null and void, not enforceable by the creditor. You will be under no legal obligation to pay any portion. The lender cannot try to seek collection of any funds on a payday loan in the state of New York.
Payday lenders, particularly those online, have a habit of structuring the loans in a way to discourage folks away from paying off the principal and keep them in a perpetual debt cycle. The clients who aren’t able to pay when the bills come due, incur more interest, but the ones who can pay it off are seeing their loans being automatically renewed by the shady lenders.
WHY NEW YORK BANNED PAYDAY LENDING
New York state banned payday lending finding them to be predatory and abusive to the consumers. At one point they found cases of upwards of over thirty lenders charging over one thousand percent interest on various payday loans.
New York stands that payday lending is a vicious way to trap folks into a long-term debt cycle when it is supposed to be just a short-term loan. They advertise this as a short, one-time way to borrow money until you get paid and then you end up getting sunk into months, even years of a financial mess.
-The loans are never based on whether or not a person can afford to repay them. The lenders don’t follow any guidelines to find out how the person will pay the debt back, and generally, borrowers can’t afford the payment when payday comes along with their regular monthly expenses.
The lender counts on the borrower not being able to pay the loan balance when it’s due. This leads to an extension or renewal or another loan being taken out to cover that one and extra fees.
These loans are grossly expensive. The rates annually for a payday loan go extremely high generally over 300 %.
Lenders request access to the borrowers checking account in order to automatically withdraw the payments. The problem is they don’t withdraw the full balance. They take only the interest and leave the balance which will leave the borrower owing much more.
Lenders are given a blank check to hold until the payment date. If the lender deposits that check and there are not sufficient funds in the account, that leaves the borrower with NSF fees with the lender and charges from the bank as well.
Online lenders can be from anywhere. They can tell you they are licensed in your state when they’re licensed in a completely different state or not licensed at all or they’re in a completely different country all together. This opens a whole can of worms with these people being invisible and having access to all of your personal information not to mention open access to your checking account.
New York feels very strongly against payday lending. They are doing everything in their power to keep these lenders out of their state and away from their citizens. They’re trying to educate the residents about the online predators and trying to crack down on the internet sites as they become aware of them.
PROTECTING YOURSELF FROM YOUR ILLEGAL LOAN
It can be tough when you find yourself in a tight spot, needing funds immediately and you have a company contacting you saying they can help you. If they sound legitimate and your desperate enough and vulnerable enough, it’s easy to get caught. Once you question if everything is really actually kosher, you need to contact New York’s Department of Financial Services to see if this lender is in fact illegal. If you find that they are, there are immediate steps that you have to take to secure yourself.
Contact the lender via email because you may not be able to find an address to send a certified letter. Let them know they are operating illegally and briefly quote state laws. Advise that you are under no further obligation to them. As a matter of fact, they owe you a refund. Tell them that you have revoked the ACH and withdrew the wage permission agreement with your employer so they cannot contact your employer regarding wage garnishment or for any reason. Copy letter to the bank and your boss.
Go into the bank in person and speak to the Resolution Manager and explain the entire situation. Let the manager know that you are revoking the ACH immediately so that no one illegal can withdraw any money from your account. Knowing that you have way overpaid this person, you will also want to file fraud papers against them if you can locate them. You will also need to close the bank account. You can switch to a new account within the same bank as long as the two do not have any ties with each other. If the bank says that it has a waiting period before an account can be closed, make that account a ‘deposit only’ account.
Let your employer know everything that is happening so that they do not release any information or funds to the lender.
File online complaints with the Attorney General, Department of Financial Services, and the State Banking and Financial Regulation Agency.
Let everyone in your circle know what is happening so that if they are contacted with any strange calls regarding you, they will know exactly how to respond and hang up the phone.
You will receive phone calls from the lender implying that they are actually legitimate or pretending that they are calling from a legal agency or pretending that they are police officers issuing warrants for your arrest. The very best way to handle phone calls of this nature is to let them know that they can direct their calls to the Department of Financial Services for the state of New York or else the Attorney General’s office and they will get hold of you if that is actually accurate information.
Their idea is that they were able to make you believe them once and possibly will be able to do it again using scare tactics. The difference this time is that you have the law on your side.
Payday lending can be a good thing or it can be a bad thing. Obviously in New York they had some very bad experiences with these types of loans to be so dead set against them. It’s nice that they are so concerned with the well being of the citizens of their state to not let them get taken advantage of by these types of scams.
Hopefully, they’ll be able to keep all of the online illegal loans at bay. They can really do some financial damage to innocent people who don’t realize what they’re getting themselves into.
David is a financial expert who graduated from the University of Fordham (Master in Finance) in 2001. He has 10+ years of experience in private equity and wealth management. With strong expertise in senior-level financial planning, personal financial analysis, and mortgages, David knows his way around personal finance. Before working at CCR he used to be a financial analyst at McKinsey.
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