Can You Sue Payday Loan Services for Excess Charges?

Payday loan services offer high-interest, short-term loans that often leave borrowers in perpetual debt to the lender. These companies often charge excessive fees that can be challenged in court depending on where you live. Keep in mind that filing a lawsuit does not mean a successful outcome.

State Level

Several states such as Arkansas and have anti-usury laws that limit the amount of interest a lender can charge a borrower. For example, Arkansas has a maximum interest rate of 17 percent. Other states, such as Ohio, have banned the practice outright though lenders often find loopholes and stay in business.

National Level

In early 2009, Sen. Richard Durbin (D-Illinois) introduced a federal bill that would limit annual interest rates of any and all loans to 36 percent. U.S. Rep. Luis Gutierrez (D-Illinois) is sponsoring an opposing resolution in the House of Representatives that only caps interest at 391 percent.

Loans And Military

Congress has already passed a 36 percent cap for all loans to members of the military.

Work With Regulator

Seek guidance from the agency that regulates loan companies in your state. The agency can find out if the lender is licensed. And even if high-interest lending is legal where you live, the agency can prosecute companies who do not follow state law.

Other Options

Besides filing a lawsuit, keep in mind that you can request your bank to disallow payday loan companies from making automatic electronic deductions from your account. This right is subject to state law.

References

• Arkansans Against Abusive Payday Lending
• Atlanta Journal Constitution: Pro & Con: Should Congress pass more laws to regulate payday loans?; Beth Malone; 2009
• Caveat Emptor: Is the moment right to bring back a usury cap?

Resources

• Pay Day Loan Consumer Information