February 08, 2021
Summary: Are payday loan debt collectors trying to use illegal tactics on you? Find out how to get them off your back and win in court!
Do you feel like you've become a prisoner to a payday loan debt collector? Does your phone keep ringing at odd hours? Have you been served a Writ of Garnishment? Or has your credit score taken a hit? Unfortunately, these scenarios play out more often than you think. Payday loans are designed to help borrowers deal with emergencies during a cash shortage until their next payday. Sadly, sometimes borrowers end up defaulting on their payments and dealing with aggressive debt collectors.
To make matters worse, if you're unable to pay on time, the loan attracts a late payment fee, an enormously-high interest rate, not to mention countless calls from debt collectors. Having a few tricks up your sleeve is critical to beating the debt collectors at their game and managing debt. Let's take a look at some of the steps you can take to beat payday loan debt collectors.
If you've verified the debt amount, contact the collector to discuss a payment arrangement. Sometimes the debt collector may agree to reduce the amount when you agree to settle the debt. For example, the debt collector may decide to waive the finance charges, late fees, and reduce the interest rate.
This is an excellent time to negotiate a payment plan. If you go this route, be sure to get a written agreement showing the payment dates and settlement amounts before making your first payment.
All correspondence you have with the agency should be sent via mail. And you should get a return receipt as proof the payments or letters were received.
Once you pay the whole debt, request a closed amount statement as proof that the debt has been repaid in full.
Once a debtor files a bankruptcy petition, all debt collection efforts must stop. Debt collectors receive notice from the bankruptcy court preventing them from engaging in any collection efforts. Note: it doesn't matter if the bankruptcy has been discharged. The petition becomes effective when the debtor files it in court.
The court protects debtors from any form of harassment or threats, from when a debtor files the petition to when it's granted. So, if a debt collector contacts you during this period, they violate the Fair Debt Collection Practice Act (FDCPA) and the bankruptcy code. It is within your rights to file complaints with the appropriate agencies. When the court finally discharges your debt in bankruptcy, it can't be collected, and you no longer owe it.
Note: Even if you don't file for bankruptcy, it is illegal for debt collectors to harass you. You can send them a cease-and-desist letter to stop their calls.
Payday loan debt collectors don't waste time when the money owed to them is due. Because they cannot access your bank account directly, they may decide to obtain a garnishment order. This court order allows them to recover the debt by taking the money from the debtor's paycheck or bank account.
If this happens to you, you can stop the debt collector from garnishing your wages. You can fight garnishment by filing a Claim of Exemption with the court. The court will consider the money you need, especially if the money is reserved for necessary expenses like rent, utilities, and child care.
Under Payment Services Regulations, a debtor can ask the bank to cancel a Continuous Payment Authority order.
When an original lender sells a debt to a debt collector, the recordkeeping may not be accurate. Most sold debts have errors and are sometimes charged to the wrong person. In 2016, 88,000 consumers filed complaints with the Consumer Financial Protection Bureau. The chief complaint amongst most was they were asked to pay a debt they didn't owe.
If you haven't received one five business days after their initial contact, it is in your best interest to request a validation letter from the debt collector. This letter provides details about your debt, how to challenge it, and the name of the collection company.
Consider gathering details about your debt, too, including information about payments made previously and the original lender. This is critical if you're planning to dispute the debt.
The FDCPA outlines a debtor's rights and protects the debtor from predatory debt collection practices. For example, debt collectors are not allowed to call you at odd hours. The Act also allows debtors to dispute the debt within 30 days. The collector can't ask for payment until the dispute has been settled.
If the original creditor hasn't provided you a repayment plan within a specific timeframe, usually two months, they may hand over the debt to a collection agency. At this stage, you may want to negotiate a payment plan with the debt collector. Here are some things to avoid:
Most payday loans involve small amounts that have accumulated fees and large amounts of interest. Debt collectors often win because debtors don't show up to court for the garnishment hearing.
If you don't show up, the judge enters summary judgment that allows the court to collect the money on behalf of the collector's agency. And depending on the state's law, you're exposed to wage garnishment, bank account levies, and even property liens.
It is never in your best interest to ignore a Complaint and Summons. You can easily file your answer on our website in minutes. While at it, you can ask for proof that you owe them money, as many debt collectors show up without this evidence. A review performed by the Consumer Financial Protection Bureau revealed that 70% of lawsuits are dismissed due to lack of proof.
Dealing with payday loans can be a significant headache. Use these tips and strategies to fight back and win in court!
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.