Default on Payment

Generally, if one was to default on a loan, they would not be committing a crime. However, a payday loan is secured by a post dated check. The lender holds the check until the customer’s pay is deposited. States consider it a crime to write a check knowing there are not sufficient funds to cover it. Payday lending customers are helpless to the threat of criminal prosecution by their lender.

In some cases, customers do not understand that they are granting the lender the right to electronically debit their checking account to cover interest payments and fees. Some payday lenders require a borrower to agree to mandatory arbitration for payment disputes. This means that their paycheck could be garnished if the loan payment is not made. It is likely that many customers do not know what they are agreeing to. The payday lending industry has urbanized a set of “Best Practices,” which states that the lender will collect debts in a “fair and lawful manner.” Payday lenders do not assess the customer’s ability to repay, but they know the post dated checks they have received are good.