Pitfalls When You Stop Payment on a Payday Loan Check
Before you try to stop payment on a payday loan check, be aware of the pitfalls.
Stopping payment on checks will incur expensive fees and the payday lender may try to cash the check when the stop payment order expires…
Borrowers who do not compare lenders may run into unethical payday lenders who try to:
- cash the check before payday knowing full well that there will not be enough funds in the account to cover it
- cash the check several times in an attempt to incur more NSF fees
- collect the loan using threatening, coercive and illegal methods
Some borrowers may opt to issue a stop payment order on the check.
Before you stop payment on a check, consider the expense and expiry date.
Stop payment orders are expensive.
Stop payment fees may range from $18 to $32 or more depending on your bank and the state in which you live. In many cases, stop payment fees exceed NSF fees.
Verbal stop payment orders expire quickly.
A verbal stop payment order will usually expire in 14 days if it is not backed up with a written stop payment order.
Written stop payment orders have an expiry date.
Under federal banking laws, written stop payment orders will expire in 6 months. Banks will purge a stop payment order from their system after the expiry date. When this happens, it will be possible to cash the check.
If you issue a stop payment order, intelligent payday lenders will not throw away your check. They will hold on to it and attempt to cash it after six months.
If you issue a stop payment order and the check does not turn up, renew the order before the expiry date.
Never close your checking account to stop payment on a payday loan check.
If you write a post-dated check and close the account before the funds are drawn, depending on your state, you may be prosecuted under bad check and/or fraud laws.
Always keep in mind that the payday lender may turn you over to a collection agency. If this happens, it will hurt your credit rating.
Stop payment expenses are one of the pitfalls when dealing with payday lenders.
The best way to avoid pitfalls, of course, is to consider payday loan alternatives.
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