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PayDay Loans

Authored By: Legal Aid Services of Oklahoma, Inc. LSC Funded

Information

PAYDAY LOANS

They used to be called "loan sharks"...Now it is a legal business. Some still use tactics that can be dangerous to your finances.

A GOOD CREDIT RATING

Remember...when you payback a conventional loan in a timely fashion, a bank or credit union will report that, and help you develop a good credit rating. Don't count on a payday lender or check cashing service to do the same, even if you do repay promptly.


Here's how to ...WATCH OUT FOR THE SHARKS

BENEATH THE SURFACE PAYDAY LENDERS WANT YOU TO BELIEVE:

They are a small, local business.
Most belong to national chains operating under many different trade names.
They charge just a small fee for their service.
Make a cash advance of $100 for a period of two weeks, and pay $15. You've actually paid 391% interest for that loan. Roll that loan over 2 or 3 times, and you will end up paying $60 for that original $100.
They are safe because they're legal.
It's more dangerous because you sign a legally binding contract. There may be nothing to help you in contract law.
They are nice guys who let you extend your loans without a hassle.
Fees are charged for each rollover causing you to pay even greater interest on your original loan.
They offer "easy cash" alternatives to other loans.
Because it's easy to roll over your loan, it's easier to become trapped in a debt cycle. You pay more fee and interest and it's harder to get out of debt.

REALITY CHECK

  • Will you really be able to repay a payday loan on time?
  • Are you only delaying when you'll be in serious financial trouble?
  • Keep Payday Lenders from Putting the Bite On You
  • Deal directly with creditors. Work out a payment plan you can live with without sliding further into debt.
  • Contact a non-profit credit counseling agency to explore alternatives.
  • Save - The best way to control your finances is to save more and spend less. At the very least, try to save enough to get you by for 3 months.
  • Credit Unions are offering low amount/short-term options for their members.
  • Talk to your employer about advance on your salary without borrowing.
  • Others may be able to steer customers to special programs for folks with less than perfect credit.
  • Churches or local charities may offer short term assistance
  • Your local 211 (agency information) may have helping agencies to refer you to.
  • Be sure your need for short-term cash is for something you need not something you want.
  • Friends and relatives may be willing to help you through a crisis, especially if you treat the loan seriously and offer to pay back with interest.
  • You may be better off using a pawn shop or credit card

If you feel you must take out a payday loan -
? shop around
? ask questions.

  • Not all payday lenders are alike.
  • Don't pick one because it's close by, has a neat sign, or because you remember your first date there when it was a hot dog stand.
  • If you feel pressured - run - don't walk - away.
  • Get the terms of the loan in writing and take it home to study.
  • Make sure you understand both the interest rate (APR) and the consequences of non-payment
  • Shop for the lowest fees.

NEW PAY DAY LOAN TECHNIQUE-WAGE ASSIGNMENT

Be on the lookout for a new pay day loan technique. The lender might ask you to sign a "wage assignment." The lender then sending this wage assignment to your employer. Some employers believe that they must pay the lender directly. Your employer might do just that: deduct money from your paycheck and send it directly to the lender.

According to Oklahoma law, the Consumer Credit Code (Title 14(A), Section 3-403:

(1) A lender may not take an assignment of earnings of the debtor for payment or as security for payment of a debt arising out of a consumer loan. An assignment of earnings in violation of this section is unenforceable by the assignee of the earnings and revocable by the debtor. This section does not prohibit an employee from authorizing deductions from his earnings if the authorization is revocable.

SPEAK UP

If it happens to you, report it. Help may be available. This may prevent the same from happening to your family or neighbor.

HELPFUL NUMBERS

Better Business Bureau of Central Oklahoma 405-239-6081
Oklahoma Attorney General 405-521-9321

NOTICE TO READER

This information is offered only for educational purposes. It is not intended to be used as specific legal advice. Every individual case is different.

Last Review and Update: Mar 02, 2010
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