We’ve been writing about payday loans here in California for years. A common question is whether a lender can sue someone who falls behind on a loan. There have been instances where payday loan companies have sued borrowers who went into default to the tune of thousands of dollars. Usually, the lawsuits are not only for the principal debt amount. They include extra charges, such as default penalties and legal fees. It is often impossible for a borrower already in a tight spot to work through the debt and lawsuit. In many states, lenders can charge borrowers for all legal fees. This is above and beyond the interest and principal owed. Most borrowers cannot even afford their legal representation costs.
Can a Payday Lender Sue Me In California If I Fall Behind On A Payday Loan?
Dealing with a lawsuit for a delinquent payday oan can be stressful for many California residents. Most people will want to take some time and consider if short-term financing is the best bet for them. Others will be content to fall behind on their unsecured loan and deal with the situation later.
It is worth pointing out that you cannot be arrested for failing to pay back your debt to an online lender in California. A judge may issue a warrant if you fail to appear in court, but only in specific legal situations. If a lender threatens you with arrest, you can report the threat to the state attorney general. Start by submitting a complaint to the Consumer Finance Protection Bureau.
The law allows California payday loan companies to sue to recoup owed funds. However, some regulations prevent lenders from charging exorbitant interest. In some states, payday loans are pretty costly. These cash advances often have annual interest rates between 30 and 400 percent. In such cases, the payment can be a nightmare if the suit against a borrower ends in judgment. Under California law, the most a borrower can borrow with a typical California payday loan is $255.
The highest a payday loan lender can charge as interest is 15% of the principal, or an amount not exceeding $45. This ensures the borrower does not have large loans accruing high interest. The Department of Finance will license any reputable company in California. Be sure all companies you apply with, including those listed in the directory of payday loans in California, have a valid license. This license ensures they will not run afoul of the State’s regulations, which protect consumers like you.
California payday loan laws offer protections if a lender wants to sue you.
You have several options when faced with a lawsuit from a direct lender. It’s best first to understand your position about the law before you hit the panic button. As always, it’s best to check with the State of California Attorney General first. They will give updated info that details your protection as a citizen of the state. The law protects you in so many ways. For instance, by California law, the online payday lender or installment loan company can only charge you for one bounced check.
In most cases, this amount can not exceed $15. The lender cannot charge fees if you request more time. Take note that a company that offers California payday loans does not need to provide you with an extension. The law further states that a payday lender should not give you a new loan while the existing loan has not been paid or to pay off a previous loan.
What to do if you fall behind and a payday loan company threatens legal action
Take time to review the contract and supplemental paperwork. Pay close attention to issues such as full disclosure and early payoff provisions. The contract for most cash advance and installment loans should be in the language you used to negotiate with the lender. If the contract language differs, you can state the lender didn’t fully disclose the terms. Remember, it is against the law for a payday lender to threaten you with prosecution for having insufficient funds to pay the loan. The same goes with most installment lenders, who will sell your debt to the same 3rd party collection bureaus. You still have other legal protections as a borrower when faced with an online loan repayment default suit. You can always contact the Department of Business Oversight for help with any creditor causing trouble above what the law allows.
Payday Loan Lawsuit – Contact your lender before they take you to court!
The most important thing is to avoid a lawsuit from your lender in the first place. The best way to avoid a lawsuit is by preventing default. There are times when such problems cannot be avoided. If you run into credit or payment problems, call your creditors and request them to waive late fees. You can even request a reduction of the interest rate, or find a way to work on another repayment plan. As with all scenarios where things seem bleak, you must remember that asking for help never hurts.
You’d be surprised how often we heard from a customer that their lender was willing to work with them. Credit card companies and services that offer payday loans in Los Angeles don’t want you to fall behind. It’s in their best interest for you to continue to make on-time payments. Remember that when you first contact them to work out a payment plan. Consider seeking the services of a financial counselor who can check on your online rates and terms. Most can review your financial situation and provide the best way forward with your installment loan or cash advance.
