A payday loan, or "cash-advance loan", is a loan that is generally repaid directly from the borrower’s next upcoming paycheck. These are usually loans in smaller amounts, but are often associated with higher interest rates due to the short repayment term. In some cases, larger loans may be paid through multiple payments over a number of paychecks. Generally, payday loans are paid in lump sum. They are sometimes also called payday advance loans.
Payday loans can often involve simple transaction, but they can also lead to various legal disputes. Some of these may include:
- Disputes over interest rates (interest rates tend to be very high on cash advance loans)
- Disputes over payment terms
- Late or missed payments
- Disputes over relatively high service fees
- Loan fraud (either on behalf of the borrower, the lender, or both)
- Breach of lending contract
- Illegal use of loan documents or loan certification ID’s (often leading to identity theft)
Lastly, payday loans can often be regulated differently depending on the state. This is because there are many concerns regarding consumer credit and consumer protection/safety.
In the event of a default of payment or other similar dispute, courts may issue an injunction requiring the borrower to pay. In serious cases, the default may lead to a lien being placed on the person’s property. Or, payment may be applied to the person’s subsequent paychecks. Again, considerable focus is placed on the consumer’s rights in these types of loan situations.
Criminal sanctions and consequences may be applied to lenders who are caught violating finance and loan laws. Common violations include identity theft and a misuse of the borrower’s personal information.
Payday loans can be helpful to borrowers who need a loan in a short amount of time. However, such loans often carry certain risks and may be limited by state laws. You may need to hire a qualified finance lawyer if you need help or advice regarding a payday loan. Your attorney can help inform you of your rights and can represent you in court in the event that you need to file a lawsuit.