Legal Question in Credit and Debt Law in California

Payday Loan

I was recently laid off and had to take a temporary job at at about 1/4 of my previous pay rate. To keep from losing my car, I applied for a payday loan. The loan amount was $250 and the loan interest was $150 a month. I was unable to make the fourth interest payment and fell behind. A week later (on a Tuesday, not my arranged pay date per our contract) I discovered that they had sent a $400 ARCH check through my account ($250 loan amount-$150 interest). I had no knowledge that they were going to do this whatsoever!! When this did not go through, I received a call from someone in Florida (loan is from Nevada). The person I spoke with called herself a ''legal investigator'' and told me that ''they were coming to get me'' and that if I did not pay the $400 that day, she would file my case to the state court by noon and then dispatch an officer! I do not know who these people are and I have never received anything in writing from the loan company or this office that is threatening me. What do I do at this point?


Asked on 11/10/03, 2:11 am

1 Answer from Attorneys
Joseph Richardson Borton Petrini LLP

Re: Payday Loan

Read the fine print of your loan agreement. This should dictate what they can and can not do. While their taking 150 bucks on a 250 dollar loan is outrageous, the rates that payday advance places charge are outrageous to begin with. Consider that the normal payback period of some 2 weeks on a 250 dollar loan yields some 45 or 50 dollars in interest. This would amount to an annual interest rate of some 400 percent. This is why payday loans are not good. They get to charge heavy interest due to their short term nature, and I would be willing to bet that every charge they levied on you is mentioned in the agreement.

Finally, I'm not so sure I would be worried about them suing you. While they have a right to get their money, it wouldn't make economic sense for them to spend a comparable amount(if not more) in fees getting a 400 dollar judgment. They'd rather scare you into paying it so they don't have to spend fees chasing it. It's not enough money for them to spend lots of money chasing it down. Get it paid the best way you can; make arrangements, etc., or whatever.

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Answered on 11/13/03, 11:09 pm


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