A cash advance loan, sometimes called a payday loan, is a short-term loan that is typically used to cover immediate expenses and is repaid with the borrower’s next paycheck. Borrowers usually obtain them from a lender that specializes in payday loans and may require the borrower to provide proof of employment and a postdated check or electronic access to their bank account as collateral.
Cash advance loans usually have a high interest rate and fees, making them an expensive form of borrowing. They are meant to be used for emergencies only and should not be relied upon as a regular source of funding.
In some unfortunate cases, borrowers can find themselves trapped in a cycle of debt as they struggle to repay the loan and cover their regular expenses. Therefore, borrowers should take care to fully understand the terms and costs of the loan before taking out a cash advance.
Is a Cash Advance Loan Considered a Loan?
Yes, a cash advance loan is considered a type of loan. The borrower receives the loan amount upfront and agrees to repay the loan, along with any interest and fees, on their next payday or within a short period of time.
Like other loans, cash advance loans come with terms and conditions that must be agreed upon by the borrower and lender. These terms typically include the loan amount, repayment period, interest rate, and any fees or penalties for late or missed payments.
What Legal Problems Exist with Cash Advance Loans?
Cash advance loans have faced legal scrutiny and regulation in many states due to a range of issues, including:
- High-Interest Rates and Fees: Cash advance loans often come with very high-interest rates and fees, which can trap borrowers in a cycle of debt. Some jurisdictions have restricted interest rates and fees to protect consumers from predatory lending practices.
- Check Fraud: In some cases, lenders of cash advance loans have been accused of check fraud by threatening borrowers with criminal prosecution for failing to repay the loan. This practice has led to lawsuits and regulatory action in some jurisdictions.
- Unfair Debt Collection Practices: Some lenders of cash advance loans have been accused of using unfair and abusive debt collection practices, such as harassment and threats of violence, to collect unpaid debts. These practices are illegal under the Fair Debt Collection Practices Act and can result in legal action against the lender.
Consumer protection laws apply to cash advance loans, just like any other type of loan. These laws provide a range of protections to borrowers, including the right to receive clear and accurate information about the loan terms and costs, the right to dispute errors or inaccuracies in loan documents, and the right to file complaints and seek redress for unfair or illegal lending practices.
In addition, some jurisdictions have enacted specific laws and regulations to protect consumers from predatory lending practices in the cash advance loan industry. For example, in California, cash advance lenders are required to be licensed by the state and are subject to strict regulation. In New York, cash advance loans are illegal, and lenders are prohibited from charging more than 25% interest per year on consumer loans.
What Happens If I Don’t Pay Back a Cash Advance Loan?
If you don’t pay back a cash advance loan, the consequences can include:
- Late Fees and Additional Interest Charges: If you miss a payment or fail to repay the loan on time, the lender may charge you additional fees and interest charges, which can add up quickly and make it even harder to repay the loan.
- Collection Calls and Letters: If you fall behind on your payments, the lender may start calling and sending letters to your home or work to try to collect the debt. These calls and letters can be stressful and may continue for weeks or months until the debt is paid.
- Damage to Your Credit Score: If you default on a cash advance loan, the lender may report the delinquency to the credit bureaus, damaging your credit score and making it harder to obtain credit in the future.
- Legal Action: In some cases, lenders of cash advance loans may take legal action against borrowers who fail to repay the loan by filing a lawsuit, obtaining a judgment against you, and garnishing your wages or bank account to collect the debt.
With these things in mind, while cash advance loans may seem like a quick and easy solution to financial problems, they can come with high fees and interest rates that can quickly spiral out of control.
If you are struggling to repay a cash advance loan, contact the lender and try to work out a payment plan or other solution before the situation escalates.
What Should I Do if a Lender Comes to My Work?
Here are some steps you can take to avoid a stressful and embarrassing situation if a lender shows up at your place of employment:
- Stay calm and professional: If a lender comes to your workplace, do your best to remain calm and professional. Don’t start an argument or become defensive. Instead, politely ask the lender to leave and explain that their behavior is inappropriate.
- Notify your supervisor: Let your supervisor or manager know that someone has come to your workplace looking for you. Explain the situation and ask for their help in handling the matter.
- Review your rights: Lenders are required to adhere to laws and regulations when attempting to collect a debt. Review your rights under the Fair Debt Collection Practices Act to ensure that the lender is not violating your rights.
- Contact an attorney: If the lender’s behavior is harassing or abusive, or if you feel that they are violating your rights, contact an attorney who is experienced in debt collection and consumer protection law. They can advise you on what to do next and help you protect your rights.
You have the right to be treated with respect and dignity, even if you owe a debt. If a lender is harassing you or coming to your workplace, protect yourself and your rights by contacting a lawyer.
Do I Need to Hire a Credit Attorney?
If you are struggling with debt, facing collection calls and letters, or have been sued by a lender or debt collector, a credit lawyer can help.
A credit attorney can provide you with legal advice and guidance on your options under the law. They can also represent you in court or negotiations with lenders and debt collectors and help you come up with a plan to manage your debt and protect your credit score.
If you are considering hiring a credit attorney, make sure to research potential attorneys carefully and choose one with experience and expertise in the area of credit and debt law. You should schedule a consultation with the attorney to discuss your situation and learn more about what you can do to protect yourself.
Remember, ignoring debt problems and failing to take action can damage your credit score, legal action, and wage garnishment. If you are struggling with debt, use LegalMatch’s online attorney-client matchings service to seek help and take action to protect your financial future.