Am I obligated to pay interest on a payday loan, if the clerk forgot to have me sign a contract outlining the terms and fees prior to giving me the cash?

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Am I obligated to pay interest on a payday loan, if the clerk forgot to have me sign a contract outlining the terms and fees prior to giving me the cash?

About 2 months ago I received cash from a payday loan company for $300. However, the clerk forgot to have me sign contrac; (called me the next day to alert me of her error). They just gave me the cash in exchange for a post-dated check. To date I’ve paid the principal amount of the loan only. Am I legally obligated to pay the interest? What are my chances in court? I never went back in to sign the contract. The clerk waited 3 weeks before automatically debiting my bank account and has been doing so every other week.

Asked on April 26, 2012 under Bankruptcy Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you were aware of the terms of the loan--that is, you were aware of the interest rate on the loan--then you most likely have to pay interest on it; and if sued, if the lender can show that you did or reasonably should have known of the interest, the lender will likely win. There is nothing magic about a signature or a signed copy of a contract. A contract is formed when there is an offer, the offer is accepted, and consideration (or things or promises of value are exchanged); a signed contract can be prima facie (or valid "on its face") evidence of an agreement, but there can be an enforceable agreement even without a signed contract. As long as it can be shown that there was an offer to loan you money at a certain rate and under certain terms, you accepted that offer, and the lender provided consideration in the form of providing the loan, they can likely establish the existence of an enforceable agreement.


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