your payday loan really enforcable?
relaxation of usury laws has let a new brand of loan-shark into
neighborhood, one whom no self-respecting debtsman would have
anything to do with, the payday lender. The payday loan is a
personal-finance product aimed at a growing sub-sub-prime,
credit-card-less market. Payday debtors, even more than credit-card
debtors, are likely to let themselves fall into a compounding cycle
of soaring balances.
routine two-week loan ranges from $100 to $1000 and can levy an
interest rate of 400 percent. The typical dollar limit set by a state
is $1000. That is, if payday lending is allowed at all. State and
local prohibitions are expanding with payday's notoriety. State
interest-rate caps are being reinstated, thanks to the gross usury of
payday lending. For military personnel, a federal law has limited
payday interest to 36 percent, and this rate is low enough to
discourage lending to that class.
payday lender requires no passing grade on the FICO score of the
payday borrower, who must have only a job and a bank account. The
borrower's "collateral" is his signed, post-dated check. He
can also arrange for his bank account to be tapped electronically.
The assumption is that he will cover the check next payday. It's a
check-kiting-cum-loan-sharking scheme, and it's even on the internet.
interest is exorbitant, because (debtsmen take note) a delinquent debt
is almost uncollectable. The lender's collection leverage is in
overdraft fees that your bank will levy on your checking account when
your check bounces, but the lender gets repercussions from his own
bank, too, if he deposits lots of bad checks.
incomparable quickness, this short-term industry flips you to outside
collection. The agent will be a payday specialist who takes up to 50
percent, because nobody else wants these accounts. This collector's
favorite weapon is repeated harassing phone calls, and he likes to
threaten you with criminal charges. Payday collectors spin the lie
that the bouncing of your post-dated check is a criminal offense, but
it is not. The collector will claim that an "investigation"
is underway, that a warrant is already out on you, that you must pay
up within two hours or the cops will be at your door to make an
arrest. No shame.
criminal collection operation based in India has hacked into the
databases of some internet payday-loan companies and ripped off the
names of debtors. Steve got the 800 number and called one of these
off-shore agents, acting as if he had been called by them. The
collector (with Indian accent and sitar music audible in the
background) instantly invented for Steve a phony case number and a
specific dollar amount of debt. He then declared that the police
would be at the door within two hours.
might take a bit longer, Steve teased, "there are two donut
shops between my house and the police station." The collector
didn't get the USA idiom.
phone then came an “Inspector Smith.” Steve asked, "Is that
the Calcutta Smiths or the Mumbai
No answer. The “Inspector” told Steve that their call was being
recorded and that a recording of the conversation was being sent to
the Attorney General of his state and to county law enforcement. He
accused Steve of check fraud, bank fraud, breach of contract, and
theft by deception.
debtor Steve could take care of the problem out of court if he would
buy a pre-paid debit card for $375 and call back. If he failed to do
this, the following would ensue: Steve's social security number would
be blocked, he could not get credit or even a credit report, he would
be fired from his job, he would become ineligible for work for six
Steve also would
lose any government benefits, and an arrest warrant was being
to the county sheriff. Steve would need, not one, but two attorneys to
defend himself in court, and, if he lost, he would have to report to
local prison for incarceration. However he could avoid all of the
above if he sent in the $375 today. In India anything goes; the Fair
Debt Collection Practices Act can be ignored.
the USA, the law is on the payday debtor's side. No criminal-law
framework supports payday lending. Your rubber check is a civil
matter, not criminal, and no DA and no criminal court wants to become
a collection agency for a payday lender. The collector is bluffing,
as usual. Calmly remind him of the Fair Debt Collection Practices Act
and order him, by writing, to stop the phone calls. Also ask for a
validation of debt and tell him you are checking to see if he has a
license to practice in your jurisdiction. That should send him on to
the next victim.
2, How Creditors Collect
Steve Katz and George Trinkaus
ex-bill-collector Steve Katz
from the publisher
$9.95, shipping included
Forever, an imprint of High Voltage Press
Order by phone: 877-263-1215, 503-223-0410.
Postal: POB 1525 Portland, OR 97207