Resolving Payday Loan Debt Through Legal Action

Payday loan debt can lead to a cycle of financial issues. Often, payday borrowers take new loans to pay off existing debt. The high finance fees revolve in short periods of time, and the debt can quickly spiral out of control. For these reasons, payday loan debt is often considered predatory lending. To protect consumers, each state has put in place several laws to regulate payday lending. Using these laws as your legal grounds, you can challenge a payday lender in court to resolve the debt.

Know your State's Laws

The first step to take is researching the laws in your state to determine if your lender broke any of these regulations. You can research payday loan laws with the Consumer Protection Agency or a similar board. The National Consumer Law Center has a comprehensive website to get you started as well. The items you will be looking for include: limits on payday loans, limits on the number of payday loans you can take, limits on interest on your loans and regulatory statutes. Regulatory statutes may include items such as necessary credit checks or income verification. If your lender broke any of these rules, you may be successful in resolving the debt in court.

Hire a Professional

Your best advocate in a payday loan challenge will be an attorney. Unfortunately, many borrowers with payday debt have low incomes and cannot afford to hire an attorney. Research low income assistance in your area; there are a number of non profit organizations donating services to low income borrowers who are victims of payday loans. If you cannot afford any legal assistance, you can still file a lawsuit. You will likely need to go to small claims court where a judge will consider the information you provide against the lender's information to resolve the debt.

Provide Accurate Statements

Whether you have an attorney or not, you need to come armed with documents showing the exact loans you took, payments you made, interest you were charged and any attempts to collect against you. All of these items can be key in determining whether you will continue to owe money. In the process of the lawsuit, do not respond to any letters from the lender. Simply take these letters into court and provide them as evidence to the judge. If the law is on your side, the lenders do not have the power to enforce any collection.

Be Prepared to Pay

Even though some of your debt may be dismissed, you cannot completely escape paying debts that were issued legally. For example, you may have two outstanding loans with a payday lender. If the lender was only permitted by law to issue one loan at a time, the second loan may be illegal and therefore dismissed. However, a judge may still decide the first loan was issued in a manner consistent with legal lending practices. You will owe any legal debts, court fees and lawyer fees at the end of your case. As a result, this is only a good option if the debts you owe are reasonably large.

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