Unlicensed lenders often use abusive debt collection practices. They threaten you, harass you, reveal your debt to third parties, try to get you fired or file civil suit against you in small claims court.
Ethical payday lenders who are properly licensed in your state will be less likely to engage in abusive collection practices. This list shows abusive collection practices used by unethical lenders gathered from various sources. It is intended to show what may happen if you do not choose your lender carefully. It is not intended to portray all payday lenders in a negative light.
Abusive Contact by Phone
- to harass and/or abuse you until you repay your debt
- call repeatedly or continuously (hundreds of calls per day)
- call before 8 a.m. or after 9 p.m.
- call your place of work or relatives
Abusive contact by phone may include shouting, abusive language, racial slurs, threats or deception. Please read Five Things You Can Do If a Payday Lender Threatens or Harasses You by Phone.
Abusive Contact in Person
- to harass, abuse and/or embarrass you in front of your peers until you repay your debt
- visit you at your home
- leave conspicuous door hangers if you are not there
- visit you at your place of work
Abusive contact in person may include shouting, abusive language, racial slurs, threats, deception and revealing your debt to your family, coworkers and neighbors.
Leaving door hangers is not illegal. State attorney generals have asked payday loan companies to refrain from leaving conspicuous door hangers and some payday loan companies have complied with this request.
- to scare you into repaying your debt
- threaten to initiate civil suit or criminal prosecution
- threaten to garnish wages
- threaten to seize property
- threaten to cause job loss
- threaten to have you jailed
- threaten to damage or ruin your credit rating
Threats are not allowed under the Fair Debt Collection Practices Act (FDCPA) unless the party making the threats has both the legal authority and intent to take the threatened action. Unfortunately, the FDCPA applies only to debt collectors. Payday lenders themselves are not bound by the FDCPA because they do not meet the definition of “debt collector” under federal law. (Thank you Jillian for kindly pointing this out!)
- to deceive you into repaying your debt
- claim to be an attorney or government employee
- claim to be law enforcement or threaten you with arrest/jail
- send you documents that look like legal papers but are not
- send you legal documents but state otherwise
Deception takes many forms. The best way to protect yourself is to understand local laws.
Reveal Debt to Third Parties
- to embarrass you in front of your peers until you repay your debt
- reveal your debt to family members, relatives or friends
- reveal your debt to your employer
- reveal your debt to the references you listed on your loan application
- reveal your debt to neighbors
Debt collectors are allowed to contact family, friends or references once in order to locate you but they may not reveal the fact that you owe money to these third parties.
- to harass and/or punish you until you repay your debt
- call you at work if your employer prohibits such calls
- visit you at work if your employer prohibits such visits
Unethical collectors will continue to contact you at work even after being specifically told that such contact is prohibited by your employer.
Initiate Criminal Action
- force you to repay your debt through legal means and/or punish you
- attempt to prosecute you under bad check laws
- attempt to prosecute you under fraud laws
Generally, it is difficult for lenders to take criminal action against you under bad check laws. When a payday loan transaction takes place, both parties understand that the checking account in question does not contain sufficient funds. It is the nature of the transaction and, in most jurisdictions, bad check laws will not apply. Be careful, however, because these laws vary by state. Some states allow criminal action if you issue a stop payment order on the check. If you close your checking account immediately after signing the check, fraud laws may apply. Please be sure you understand the laws in your region and consult an attorney if you are in doubt.
Initiate Civil Suit
- force you to repay your debt through legal means
- force you to pay additional “legal fees”
- initiate civil action through small claims court
- hope that you do not show up in court
- win a default judgement if you do not appear
- claim “attorney fees” in the event of a default judgement
Some view using small claims court for debt collection purposes as an abuse of the legal system. It adds unnecessary strain to an already overburdened justice system. Many have questioned the tendency to take women to court more often than men. Attorney fees typically range from $100 to $350. One lender was claiming $350 in “attorney fees” regardless of the amount of the loan or the work that actually went into the case. Court awards are often twice the amount of the original loan.
Ethical payday loan companies that are properly licensed in your state will be less likely to engage in the above practices. Please compare payday lenders carefully and check state regulatory agencies that license payday loan companies and state-licensed payday lenders.