Is it legal to obtain payday loans in New York? I have several loans that I cannot repay. What do I do? I’m a NY state resident. I took out online loans to pay for payday loans. The principal amount of both loans was completed in February. I’m not sure why I cannot afford to pay the loan for any more. Are you able to offer any suggestions on what to do next? Askbill – More Show less Many consumers are enticed by these loans that are called « cash advance loans », « check advance loans » or « deferred deposits check loans ». On average, $300 loans have a charge of between $15 and $30 per $100 borrowed. The borrower will sign an unpostdated check and present the check to the lender. The lender then uses the information to transfer any payment or the total loan amount from the bank account of the borrower. An especially insidious practice is to withdraw a partial amount from the account in a « customer service. » The partial payment may be a perpetual installment that will continue even if people who are requesting it try to stop the payment. With interest rates this high and terms so condensed, it’s no wonder that loans are frequently repeatedly rolled over by the lender. Thus the annualized rate of interest for the borrower can range from 390%-780% APR, depending on the amount of times the principal is rolled. A funny fact regarding payday loans is that Wikipedia.org places payday loan in new york loans under Loan Shark. According to Wikipedia.org’s leading online encyclopedia it states that « if loan sharking has high interest rates and the credit program is one that traps the borrowers, then this label is applicable. » Quick Tip New York law makes payday loans illegal. A debt collector is not authorized to collect any New York resident’s payday loan. The New York State Dept. The New York State Department of Financial Services informed debt collectors that it was unlawful to take payday loans in New York. You can file a complaint with Dept. of Financial Services, if you are a resident of New york and is being approached by a collection agency to request a payday loan. The Federal Trade Commission offers a fantastic website that explains payday loan alternatives. Consumer rights and payday loans A payday lender may try to collect the amount. The payday lender may sell the loan to a collection company if the borrower is in default. We’ll discuss this in the future. The payday lender, or collection agency, could bring a lawsuit against you to recover the entire amount due. The lender can sue you and get an order against you. The payday lender will then have the authority to apply the judgment in civil court as provided by law of the state. Bank account levies are among the most common ways to enforce a judgment. Note that not on this list of enforcement actions is calling your employer, contacting your neighbors, or getting a warrant for your arrest. Refusing to pay back a loan can be a civil, but not criminal matter. Payday lenders frequently use the threat of arrest for check fraud. This threat isn’t applicable if the payday lender is not able to prove that the borrower intended to pay back the loan. It can be very difficult to prove that. Keep in mind that no one has been detained or arrested for debt in the United States since the Civil War. If the payday loan business sells the account to a collection agency and the borrower becomes required to pay back the amount to the collection agent. Editor’s note Comments on this site are no longer accepted. Learn more about payday loans and how to manage payday loan collections. Look over the Bills.com sources for payday loans in California, Florida. Illinois. Massachusetts. Missouri. New York. Texas. To learn more about the laws governing payday loans in these states, visit this page. A federal law known as the Fair Debt Collections Practices Act (FDCPA) stipulates that a third party collection agency must cease calling you when you notify them in writing that you wish to do so. California, New York, Texas and Texas have extended many of the regulations of the FDCPA to include creditors who are original. Check out the advice if you’re being harassed by a Collection Agent to find out what steps you can take if you think a collection agency is in violation of the FDCPA. If the payday lender decides to sell the account, the debtor can stop calling by sending a cease-communication request letter to the collector. This is often referred to as a cease and desist letter. For examples of cease-and desist letters, visit the Bills.com Debt Help Center. What can I do to manage payday loan collections? A lot of payday loan companies employ intimidation to strike fear into the borrowers. It doesn’t necessarily mean that a person who is who is in debt is no longer entitled to be a consumer. The payday lenders typically require their customers to provide their bank account numbers in order to take payments out of their accounts via Automated Clearing House. Payday lenders may attempt to withdraw funds from the accounts of borrower who do not have enough funds. This can result in overdraft fees and, if it happens often enough the bank could close the borrower’s accounts. An effective method to deal with payday lenders who repeatedly remove funds from a borrower’s account is for the borrower close the account and then to reopen it in a different bank. If the bank does not connect all transactions made from the old account with the new account, it’s not feasible. In the event that this occurs the bank will check the account in question for the funds that are to be taken out from the payday loan company. The instruction here is to ensure that the bank will not permit electronic withdrawals from the previous account to be automatically transferred to the new account. For more information about your rights as a New York resident, read the Bills.com article New York Collection Laws. New York Payday Loan New York has several laws prohibiting payday loans. New York General Obligations Law Section 5-501 regulates the rate of civil usury at 16 percent. The limit for criminal usury is 25% under New York Penal Law SS 190.40, 190.40. New York law bars check cashers who have a deferred date to cash. Payday lending is not legal in New York. How can payday lenders legally be operating in New York? New York payday loan lenders partner with banks in states with deregulated banking. They make loans through electronic money transfer. They say that the local shopfront facilitates loans for the bank which exports the state’s interest rates as well as other terms to New York. This is called rent-a-bank lending. The New York City Dept. Consumer Affairs Tips about Payday Loans. The article explains New York law and provides guidelines on how to stay clear of payday loans. Also check out the New York State’s Avoiding Dangerous Loans or ‘Predatory’ lending. More information on payday loans To learn more about tactics and strategies for dealing with creditors, check out the Bills.com article on Debt Negotiation and Settlement Advice. Bills.com also offers more details on its Payday Loan Information pages and has answered readers’ questions regarding payday loans in California, Florida and Illinois. The payday loan company can pursue legal recourses against you if you don’t pay off a payday loan. This includes wage garnishment and levy and a lien. For more details on the rights of creditors or debtors, check out the Bills.com resource Collections Advice. Also, make sure to check out the Bills.com Budget Guide and Financial Planning Guide for free. These can help you to control your finances as well as provide details on budgeting and financial management.