Most of the people going through dire financial times fall in the trap of Payday loans, also known as ‘cash advances loan’ without realizing that instead of helping them these loans can push them more under debt. If you are facing consequences of having subscribed to a payday loan a New York Bankruptcy attorney can help you in navigating through the mess.
Consumers, first need to know that payday loans are strictly forbidden in New York as they are considered Usury, yes many payday loan operators do operate in New York but we will get to the loophole they use to do it later. Under New York Code section § 5-501 the civil usury cap is fixed at 16% APR and New York Code section § 5-501 the criminal usury cap is fixed at 25% APR, which basically means that it’s illegal for someone to provide a loan to others at an annual rate of interest of 25% or more. The law in New York prohibits anyone from making payday loans in-person, by telephone, or over the Internet.
Payday loans are designed in such a way, so as to make a debtor fall into debt trap and they are considered as ‘Loan Sharking’ as the interest rate charged on them are astronomical as they generally lie in between 500-800% Per Annum, additional fees and other charges are added if the debtor fails to repay the loan on time and has to go for renewal and a debtor is commonly asked for pre-authorized electronic withdrawals from a bank account by the creditor which is misused to deduct ‘customer service’ charge every now and then. Once you have fallen into the trap there is no way out other than to contact a New York Bankruptcy Attorney.
The second most important thing regarding Payday Loans a consumer must know is that it’s illegal for a debt collector to collect, or attempt to collect, on a payday loan in New York State, in 2013 the New York Financial Services Dept. was directed by the Governor of New York to inform this to all the debt collectors in state.
Payday loans are offered in New York through a loophole which is the ‘rent-a-bank’ lending mechanism, where the creditor shows a storefront to be merely playing the role of a broker for a bank in other state. For collections, debt collectors generally file a lawsuit against non-paying debtors and if they receive a judgment against the debtor they may enforce it by property liens or wage garnishing. Sometimes, Payday loans creditors sell the loan to collection agent making the debtors obligated to pay the loan to the agent. Payday loans are important reasons which make many people consider hiring an attorney for debt settlement.
Maxwell Law Firm, PLLC assists clients with debt defense and settlement, foreclosure defense, tax collection defense, filing for chapter 7 and chapter 13 bankruptcy and mortgage home loan modifications in New York, Brooklyn, Queens and Nassau County. Contact us and speak to our competent and experienced New York Bankruptcy Attorney at 718-701-0095