If payday loans are illegal in your state, do you still have to pay them?
Question Details:
I have payday loans and just found out that they are illegal in my state. I have tried to place a block on my bank account to prevent them from accessing it, but they were able to anyway. This has caused an overdraft on my account for $2600. I am in a difficult place because this leaves me no money and I do not know what I am able to do about this situation. I spoke to the bank and there is no way that they are able to reverse the transactions on my account. I need to know if there is anything I can do to get back my money or prevent future charges?
I am a Maryland barred attorney - payday loans are not per se illegal in this state, however, the "lenders" do have to register with the state Commissioner of Financial Regulation.
If someone not licensed issued the loan, you are dealing with an "illegal" loan and the lender will be prevented from collection efforts for any of the loan (principal or interest). Your bank may be able to put a hold on any disputed charges not originated by you (in other words, if the lender accessed your account), although they may decline to "reverse" charges until the dispute is resolved.
At the outset, you may want to contact the Commissioner to find out if the lender you were dealing with was licensed and/or call an attorney licensed in this state. There are certain interest caps set in the law that may apply to your situation.
First, close that bank account so no body can withdraw more from it.
Second, check that the loans you have are in fact illegal. Just because something is called a "payday loan" does not automatically make it illegal. What is illegal are loans for too high an interest rate or which have certain other characteristics that make them predatory. You do not describe what your loan is like (interest rate, tersm), so it's impossible to tell whether your loan is legal or not. Contact the MD Dept. of Labor, Licensing, and Regulation, with all the details about your loan, and find out whether it is legal or not. Here's a link that will give you a place to start: http://www.dllr.state.md.us/finance/consumers/
If the loan is illegal, you should be able to recover interest, though you'd probably still have to pay back the principal (otherwise, you'd be stealing from them). The Dept. may be able to help, though you might also need to retain your own attorney.
If the loan is legal, though, you need to pay it.
