Of course, the best way to deal with payday (aka check cashing) lenders is to avoid them in the first place. Payday loans are some of the most expensive forms of credit available and are rarely, if ever, a smart option. Still, payday loans are very common and they utrap you in a cycle of continuing to obtain these loans when you cannot pay the loan balance when due and take another loan to pay off the first one. This is exactly the cycle the payday lenders want because the longer they can keep you in the cycle, the more money they make. And even worse, when a payday lender reaches into your checking account for payment on the payday loan, they’re usually taking funds that you need for food, utility service, medicine, clothing, and other necessaries.
If you are caught in this cycle, it can be tough to break. Short of filing a bankruptcy case to address your situation, there are some things you can do to break away from the payday lender so that you might at least get temporary relief from them, protect your funds to pay basic living expenses, and have time to consider more permanent options.
Breaking Away from Payday Lenders
Stop Payment Orders
The first thing you might want to consider is a stop payment order to your bank. You should notify both your bank and the payday lender, in writing, that you are placing a “stop payment” on your account to prevent the payday lender from taking money from your account. Note, however, that this is not a complete solution to the problem. Some payday lenders have figured out ways to evade stop payment orders. And while these evasion tactics may not be legal, such tactics will still give the payday lender access to your money. Also, your bank will charge a fee for a stop payment order and these fees can take a chunk of your limited cash and cause you almost as much grief as the payday lender you’re trying to fend off. Finally, the stop payment order does nothing to address the underlying problem, i.e., the debt is still owed. But, a stop payment may be a quick way to get some temporary relief so you can pay your light bill or buy groceries.
Change Banks or Credit Unions
A better consideration may be to go to a completely different financial institution and open a brand new account in that financial institution. Re-direct any direct deposits into this new account. If there are any legitimate automatic drafts for other debts like mortgage payments, insurance premiums, or other drafts on the old account, make sure to set these up on the new account. Then, once the new account is opened and properly set up, go and close the old account. You have the right under the Uniform Commercial Code to close a bank account. It’s best for you to personally visit the old bank and close the account in person. You should also close ALL accounts you have at the old bank. Do NOT sign up for any overdraft protection. Withdraw all funds from the account. Deal with a branch manager and confirm everything in writing.
When you take steps to prevent the payday lender from getting paid, the payday lender will sometimes threaten you with a criminal prosecution under the “bad check” laws. In Mississippi, this is a completely baseless threat because Mississippi law prohibits a criminal prosecution for bad check in this circumstance. Other states may also have similar laws.
In the long run, you’ve got to figure out how to permanently solve your payday loan problem. Unless you can pay your balances and finally get away from the payday lenders that way, you probably need to seriously consider formal debt relief under Chapter 7 or Chapter 13 of the Bankruptcy Code. You need professional help to assess your options there. Our attorneys have many years of experience in helping honest, hard working people like you to obtain permanent debt relief. You can call any of our offices for a free consultation to discuss your options.