Is New York legal for payday loans? I have several I can't pay, and they are just too much. What can I do to help? I'm a NY state resident. I took out several Internet payday loans during February. They have been paid back well over the amount of principal. I'm not sure if could afford the loans any longer. Would you be able to provide any advice as to what next? Askbill More Show less These loans are also known by the names "cash advances", "check advance loan," or "deferred check check loans" and can be very problematic for consumers. A charge of anywhere between $15 and $30 for each $100 borrowed is assessed for a credit of $300. The borrower must provide the lender a post-dated cheque that the lender then makes use of to electronically transfer either a payment or the complete balance of the loan from the borrowers account. "Customer service" or "customer service" is a method that allows partial payment to be taken from an account. This can be extremely risky. The partial payment is then a perpetual installment that continues regardless of the borrowers' best efforts to halt it. With interest rates so high and terms that are so condensed, it's no wonder that loans are frequently repeatedly rolled over by the borrower. Therefore, the annualized interest rate for the borrower ranges from 390% and 780 APR, contingent on the number times that the principal is transferred. One slightly light-hearted fact regarding payday loans is that Wikipedia.org is the most popular online encyclopedia, list payday lending under Loan Shark, stating that "if the most important characteristic of loan sharking is high interest rates and a product that traps debtors, then this label is definitely applicable." Quick Tip New York's law against payday loans bans debt collectors from attempting to collect from New York residents who have taken out payday loans. In February 2013 the governor of New York directed the New York State Dept. The New York State Department of Financial Services informed debt collectors that it was illegal to take payday loans in New York. You can file a complaint with the Dept. If you are an New York resident, and a collection agency attempts to collect a loan, please contact the Dept. of Financial Services. The Federal Trade Commission offers great information on payday loan alternatives. Consumer Rights and Payday Loans A payday lender can try to recover the balance. The payday lender may transfer the debt to an agent for collection if the borrower does not pay. If the payday loan company (or collection agency for that matter) can't convince you of paying through conventional collection techniques like letters and phone calls to collect, it may file a suit against you to recover the amount. If the lender decides to sue you and obtains a judgement and is able to take the necessary steps to enforce that judgement in civil court. The wage garnishment process is the most commonly used method to enforce any judgment. It is important to note that enforcement actions such as calling your employer, contacting neighbors, or obtaining warrants for your arrest are not included in this list. Failure to repay a loan is a civil matter, and not a criminal offense. One common tactic payday lenders employ is to arrest for check fraud. This is a groundless risk unless the payday loan provider has evidence that proves the borrower did not intend to repay the payday loan. It's hard to prove this. It is vital to remember that no one has ever been detained or imprisoned in the United States for any debt since the time of the Civil War. The borrower is obligated to pay back any balance due if the payday loan company decides to sell the account to an agency for collection. Editor's Note Comments on this webpage are now closed. Payday Loans will explain how you can take payday loans. To learn more about the laws governing payday loans in these states visit Bills.com. A federal law referred to as the Fair Debt Collections Practices Act (FDCPA) provides that a third party collection agency must cease calling you when you notify them in writing to do so. California, New York, Texas and Texas extend many of the rules in the FDCPA to include the original creditors. For advice on how to deal with a collection agent harassing you, see the following advice if you're being harassed by a Collection Agent. If the payday loan provider transfers the account to a collection agency, the debtor can stop the phone calls by sending an cease communication demand letter, commonly called a cease and desist letter to the collection agency. (See the Bills.com self-help debt center for samples of cease and desist letters.) How do I manage the collection of payday loans? A lot of payday loan companies employ intimidation in order to create anxiety in the minds of those who are borrowers. This does not suggest that a person with debt has lost their rights to be an individual consumer. Payday lenders often require the borrowers to supply their bank account numbers in order to take payments out of their accounts using Automated Clearing House. If the account that the borrower is in does not have sufficient funds, the payday lender can continue to withdraw funds. The borrower might be subject to charges for overdrafts, and when the procedure is repeated enough the bank may shut down the account. Payday lenders who take money from borrower's accounts frequently are usually dealt with by the borrower closing the account and opening another one with the same bank. If the bank is unable to link all transactions from the old account with the new account, this is impossible. If this happens the bank checks the new account for funds that are to be taken out from the payday loan company. The lesson here is to make sure that the bank does not allow electronic withdrawals from the previous account to be transferred automatically into the new account. For more details about your rights as an New York resident read the Bills.com article New York Collection Laws. New York: Payday Loan New York has several laws that prohibit payday loans. New York General Obligations Law (SS 5-501) sets the 16% APR for civil usury limit. Under New York Penal Law SS 190.40 and 190.40 the criminal usury cap is 25 percent APR. New York law bars check cashers deferred-date cashing. How can payday lenders in New York operate legally if payday lending is illegal? New York payday loan lenders cooperate with banks in states with deregulated banking. These lenders offer loans through electronic money transfer. They say that their local storefront is brokering loans for the bank which exports interest rates from the state of its origin to New York. This is known as rent-a bank lending. The New York City Dept. Consumer Affairs Tips about Payday Loans. It provides a detailed explanation of New York law and provides guidelines on how to stay clear of payday loan in new york loans. The New York State Prevention of Dangerous or Predatory Loans is also available. Additional Information about Payday Loans To find out more about the strategies and tactics to deal with creditors, read the Bills.com article Debt Negotiation and Settlement Advice. Bills.com provides additional information on their Payday Loan Information page. They also respond to questions from readers about payday loans in California and Florida, Illinois, Massachusetts and Missouri. If you do not repay your payday loan, the payday loan company has several legal remedies that include wage garnishment, levy and lien. Learn more about creditors and debtors on the Bills.com resource Collections Advice. Also, take a look at the Bills.com Budget Guide and Financial Planning Guide for free. They can assist you control your finances as well as provide information about budgeting and prudent financial managing.