I have quite a few bankruptcy clients here in Houston that have been desperate for money, and have borrowed money from internet payday lenders. Talk about an expensive way to borrow money! But I guess if you need money badly, to pay the rent or to buy food or medicine between paychecks, you really don't have much choice.

At least the FTC has "cooled the jets" of a group of such companies operating out of the United Kingdom, and the payday lenders have agreed to change their ways and pay $1 Million in fines. Anyway, payday loans are dischargeable in bankruptcy just like any other debt.

Some of my clients think they are different, because they have given a post-dated check to the company, or given them their checking account information. To my knowledge, if the payday loan companies deposit the check, it is not something that they can prosecute you for- they knew the check was bad when they took it.

And if you are going to file bankruptcy and they have your checking account information, I would just close the account, and list the payday lender and possibly also the bank as creditors. And stop borrowing from payday lenders. You can be worse than broke. You can be broke and in debt to payday lenders. An excerpt from the FTC article is as follows: "The defendants operated from the United Kingdom and targeted consumers in the United States, who were misled into believing that the defendants operated from Nevada.

According to a complaint filed by the FTC and Nevada in 2008, the defendants told consumers that the loans had to be repaid by their next payday with a fee ranging from $35 to $80, or the loans would be extended automatically for an extra fee debited from consumers’ bank accounts until the loans were repaid. The FTC charged the defendants with violating the FTC Act by using unfair and deceptive collection tactics.

The Commission alleged that they falsely threatened consumers with arrest or imprisonment, falsely claimed that consumers were legally obligated to pay the debts, threatened to take legal action they could not take, repeatedly called consumers at work using abusive and profane language, and improperly disclosed consumers€™ purported debts to third parties.

They also allegedly failed to make required written disclosures to consumers before consummating a consumer credit transaction, such as the amount financed, the annual percentage rate, payment schedule, total number of payments, and any late payment fees, in violation of the Truth in Lending Act (TILA) and Regulation Z. The settlement order requires the defendants to pay $970,125 to the FTC and $29,875 to the State of Nevada. The order prohibits them from falsely claiming that consumers may be arrested or imprisoned for failing to pay debts, that they are legally obligated to pay the full amount of a purported debt, and that for nonpayment they are subject to lawsuit, seizure of property, or garnishment of wages.

The defendants also are barred from repeatedly calling consumers’ work places, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers’ purported debts to third parties. NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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