Payday advances signThe Wall Street Journal posted today that the “Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including on-line payday lenders” WSJ.

Payday loans are short term loans at high interest rates. These types of loans are legal in Ohio. In Delaware Ohio they are very noticeable. All you have to do is drive down South Sandusky Street in the City of Delaware and you will find 2 or 3 locations within about a half a mile.

According to the article, a spokesman for the Online Lenders Alliance said that the Justice Department’s actions “would cut off an important credit choice for millions of underserved consumers”. I personally have a problem with that statement. These “underserved consumers” do have few credit choices, and when they chose to borrow from a payday lender or cash advance company, they become trapped in a viscous cycle that they cannot escape.

Payday Loans are Legal in Ohio

As an Ohio Bankruptcy Attorney, where payday loans are permitted, I see many clients who have borrowed from these institutions. The stories are not pretty. Every pay period they have a couple of options: 1) pay the loan plus fees in full; 2) pay the fees and borrow again, causing the balance to grow larger; 3) don’t pay and risk the payday lender trying to cash their check, causing overdraft fees and further financial damage.

Payday Loan Collections

Collections start when a payday loan prisoner does not make good on the loan. Granted, we have become a little more civilized in the last 50 years and you should not have to worry about some goon breaking your kneecaps, but the collection tactics are still deceptive and unsavory. The collectors for these companies try their best to intimidate the borrower into paying the money. Many times they announce themselves as Investigator Smith or Investigator Hughes or Investigator (fill in the blank). They call friends and family about the debt. They call you and threaten to have you arrested the next day if you don’t pay, and you may be arrested at work. They truly scare many people. They are ruthless. They have a job to do and that is collect money, period. They don’t care about you.

Payday Loan Collection Protection

The good news is that these collection practices are illegal. If you have payday loans and have been called by an Investigator or someone else trying to scare you into paying the money, seek legal help. You have rights and you have protections. Filing a complaint against the collector for unfair and deceptive collection practices might be an option. Just hiring an attorney to make a few calls might be all you need. You still owe the debt but you don’t have to be abused. Filing bankruptcy can make the debt disappear for good.

Payday Loan Industry Growing

Online payday lending grew 10% in 2012 and accounts for nearly 40% of all payday lending, according to the WSJ article. Our economy has not fully recovered and people are still getting further into debt. Payday loans are not helping consumers, they are trapping more and more in a downward debt spiral.

photo by: HelenCobain

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