If payday loans are illegal in your state, do you still have to pay them?
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If payday loans are illegal in your state, do you still have to pay them?
I was recently injured at work and had to live off of on-line payday loans. Now I am in horrible spiral. However, I just heard that in my state it is illegal for these loans. What can I do? Can they sue me for nonpayment or can I just close my bank account?
Asked on December 22, 2012 under Bankruptcy Law, Kentucky
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
If a given type of loan is illegal in your state, you can may be able to avoid paying the interest, but you'll still have to repay the principal. That is because when a loan is illegal, it is void; when it is void, both parties are put back in their starting positions--i.e. you have to return the money you borrowed. You do not get to keep the lender's money; if you try, they could take legal action against you. To confirm that this particular loan is in fact illegal in your state, you should consult with an attorney who can evaluate the situation, in light of its specific facts, with you.
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