Expert: Chris Ebert - 8/24/2009

Question
Where do I start? I took out a payday loan awhile back and 60 loans later I defaulted on one.  I called the minute I realized my error.  I explained to the representative at Cash Transfer Centers that I had just had a baby and at birth we found out she has DS, so a few extra expenses came up.  I told them that when I borrowed an additional loan I was unaware that the previous one had not cleared.  As you can see this is how I eneded up 60 loans later.  On the draft date I would just apply for another one in order to keep my head above water. Any-who the first one was for $600, pay back should have been $762, but because it was returned I now owe $820 plus $762 that was borrowed without knowing the first one didn't clear.   I knew my paycheck would be less, so I figured the worst would be an overdraft fee, not an overdraft fee plus returned check fee and because they pull the amount due in two transactions I paid two overdraft fees and two returned check fees. I did call CTC, told them the situation and and if I could have more time to pay.  They said the was no way to stop the draft on the 31st and that I woul have until 9/15 to pay the $820.  Since I can't borrow again on the 31st this would not be possible, but they said that was the best they could do.  I closed my bank account because I can't afford to have anymore overdraft or returned check fees hit the account.  They told me they could try to draft the account multiple times and that is in the agreement...I looked over it .  I do want to pay them back, but I can't do it in the time they have allowed.  What am I going to be up against?  I'm worried they will contact my job.  Should I give my payroll dept. a heads up?

Answer
V,

Getting out of the payday loan trap sounds like a good thing to me. I do not care what it is going on financially in your life, payday loans are not ever a solution to your financial problems. Think about it. It is like losing one and sometimes 2 days of a work week's income just in interest and fees you pay.

Now to your problem. I did not see what state you reside in so this information is generic.

1) If someone contacts your employer, then send that person a cease and desist via certified mail. Let them know your employer does not allow collection calls at work. Keep good records of any violations.

2) Generally, pay day loan companies threaten to sue and do horrible things to you but most of the time they do not. The legal options are often too expensive to collect what little is owed. IF they do sue, then you will need to answer the lawsuit with the court.

3) Save up your money until you have saved up 75 to 80 percent of what you borrowed. Go and make a one time settlement offer. I would not offer to pay them back in installments. Get what ever agreement you have in writing before you pay them.

Good Luck!