Payday Loans and Internet Lenders
One of the results of a bad economy has been a rise in payday loans. A payday loan is a short term loan that is meant to cover a borrow until their next paycheck. Typically, a borrower provides the lender with their checking account information and the lender deposits money into the account to be paid back within a short period of time. When people who do not have the assets to obtain a traditional loan get into financial trouble, they often don’t know where to turn so they look to the internet and find these payday loans. Although some may be okay, many turn out to cost a lot more than a borrower bargained for.
Most lenders are subject to state usury laws. These are laws enacted in each state that protect consumers from unreasonably high interest rates and fees. Many online lenders either ignore these laws or are not subject to them because they are not in the United Stated or they are sovereign nations under Native American law. This means they are not subject to state or federal law and you are not protected as a consumer. As a result, you may be in a state that caps the interest rate at 25% and still obtain a loan online from one of these lenders that charge 1000% interest. Although the payday loan industry justifies their extremely high interest rates by explaining that they are meant to be paid back quickly and thus shouldn’t accumulate too much interest, most people find that they are paying back far more than they borrowed and these loans can lead to a downward debt spiral.
Many view these loans as being predatory to lower income people. If you are considering a payday loan it is important to research the lender with the Better Business Bureau. You should also explore all other options first and treat these loans as a last resort.
If however you do have a payday loan and are under the belief that they cannot be discharged in a bankruptcy because these lenders have access to your checking account and have post-dated checks from you, you can in fact discharge all obligation to pay these lenders in a bankruptcy proceeding.