Bouncing a check to a payday lender can create even more problems.
Payday loans can be a solution for people with short-term financial needs. Qualifying for a payday loan only requires proof of income, references, a utility bill and a bank account. As long as the loan is repaid on the due date, there generally are not any issues with using the service. Problems can arise, however, if a borrower cannot pay the loan back. If this is the case, there are several consequences to bouncing a payday loan.
Bank Fees
Each time the check is presented to the bank and the funds are not available to cover the check, the bank will charge non-sufficient funds (NSF) fees. Theses funds vary by bank, but are generally $30 or more. The payday lender can present the check multiple times, depending on the payday lending laws of the state the lender is licensed in. Most payday lenders present the check twice before beginning collection procedures.
Phone Calls
Payday lenders whose checks are declined for payment will call the borrower and the references the borrower provided to get the payday loan. This can lead to embarrassment for the borrower
Demand Letters
Payday lenders will send letters to borrowers with defaulted loans demanding payment for the amount owed.
Small Claims Court
To recoup their losses, a payday lender will take a borrower to small claims court and sue for the amount of the loan, penalties, attorney fees and interest. If the borrower does not come to court to defend his case, the court normally issues a summary judgment for the payday lender.
Wage Garnishment
Payday lenders that have received a summary judgment from a court are allowed to request that a borrower's employer garnish the borrower's paycheck to recover the amount awarded the lenders.
Credit Score
Payday lenders that send unpaid loans to collection agencies will create a negative item on a credit report. This can lower a credit score significantly. Also, because it was a check that went unpaid, the payday lender can report the bank account to check verification companies, which will prohibit the borrower from writing checks to any establishment in the future.
