There is a thin line between the legality and the illegality of online payday loans. There are several ways of determining whether the lender you’re trying to use is on the right side of the line. First, payday loans are illegal in some states. Even in states where they’re legal, the companies need a license to practice. There are single-state and multi-state licenses, and, as a potential borrower, you need to be vigilant in your research.
There are many payday loan lenders in the digital space and what they do is ensure that their headquarters are located in states where they’re unregulated. Several federal regulatory bodies ensure that lenders do not burden loan consumers with unnaturally high interest rates, hidden fees, and abusive debt collection practices.
Bodies/organizations like the Federal Trade Commission (FTC) and the Office of Fair Trading, and the Financial Conduct Authority perform these tasks. Many state and federal laws protect you as a borrower to ensure that companies do not take advantage of you.
The line is thin because you as a borrower may not know the laws and policies that protect you, and some unlawful online payday loan providers may skirt these laws.
There are red flags that are easy to identify when trying to gauge whether a company is legit. First, ensure that they are committed to ensuring that your information is secure. Look at the website URL. A company with safety in mind will have “https” in its URL.
Second, ensure that have a peek at the hyperlink there is a lock before the website’s URL in case “https” is absent. If the lock looks broken, then you should be suspicious. Are they mentioning any data protection practices? If so, read the fine print to ensure they detail what information they protect and how.
The website should also look well-thought-out and well presented. Professionalism is a crucial factor in legitimate companies. How do they advertise their products?
What are their contact details, and where is the company hosted? Do they have jurisdiction in your state? Google the company and read their reviews. You’d be surprised at what past customers can reveal.
You can go even further and have a look at the company on Better Business Bureau (BBB). This bureau uses different criteria to grade organizations’ trustworthiness and legitimacy.
Q5. Can online payday loans garnish your wages?
A lender can garnish your wages, but this is under the condition that you have failed to repay your loan, and they take you to court and win. A court can grant the lender a court order, which they’d then present to your employer. This way, your employer can legally withhold a part of your wages and send them to your debtors directly.
Please note that some lenders may threaten you with this course of action despite not having a court of order. These threats aren’t actionable. Ensure to contact your lender for alternative methods once you realize that you may not be able to repay your loan on time. Contacting them will at least prevent you from getting a court summon. You should also appear in court once summoned so that the judge can hear your side of the story.
If a lending company is offering you an extended grace period before you need to repay the loan, think twice
It’s important to note that your lender can’t contact your employer directly to request a garnish of wages. Also, your employer isn’t obliged to garnish your wages without a court order. However, if it ever happens, be sure to contact your lawyer for legal advice.