Can an on-line payday loan company take out 4service fees in 4 checks before they start the “pay down” period?

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Can an on-line payday loan company take out 4service fees in 4 checks before they start the “pay down” period?

The company has taken out a total of $500. The original loan was for $500. They are now saying that I owe $650 to pay it in full. The $500 was service fees and because I didn’t go on-line and click pay down status the loan was extended. The 5th withdrawal will pull $200 and $150 will be service fee and $50 towards principal. It’ll be this way until paid in full. Is this legit?

Asked on March 23, 2011 under General Practice, Colorado

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You certainly are in a predicament here.  Payday lending is legal in the state of Colorado.  If you are interested in getting a payday loan in Colorado, you should be aware of state laws that protect you from predatory lending.  In Colorado, a lender may charge a finance charge for each loan deposit, but the fee may not exceed more than twenty percent of the first three hundred dollars loaned, plus seven and a half percent of any amount above the first three hundred dollars.  The finance charge is considered fully earned (by the lender) on the date of the transaction.  The maximum loan amount that any consumer may have at any time, whether through multiple loans or one loan, is five hundred dollars.  A consumer may rescind any loan by five pm on the business day after the transaction took place.  All of the previously mentioned information is required to be posted in at least ten-point type on every loan agreement contract.  If you think that you have been a victim of predatory lending contact your state attorney general's office.  Good luck to you.


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