Are the New York payday loans legal? I have several I am unable to pay and are just too much. What do I do? I'm a NY state resident. I took out a few Internet payday loans during February. They've been paid off far beyond the amount of principal. I'm not certain why I cannot afford to pay these loans any longer. Do you have any recommendations for me to follow? Askbill More Show less These small loans, also known as "cash advance loan", "check advanced loans," and "deferred deposit checks loans" can be problematic for consumers. On average, $300 loans are charged a fee of $15 to $30 per $100 borrowed. The borrower is required to send a post-dated copy the check to the lender. The lender will electronically transfer either a loan payment or the entire remaining balance on the account of the borrower. "Customer service" or "customer service" is a term used to describe a procedure which allows partial payment to be removed from an account. This is especially dangerous. The partial payment becomes an ongoing installment that is not stopped, despite the best efforts of people who are the borrowers. Since the rates are high and the terms of these loans are too short, it's not surprising that the majority of them are rolled back over and over again by the creditor. This results in an annualized interest rate of between 390% to 780% based on the number of times the principal is transferred. A fun fact about payday loans: Wikipedia.org is the most popular online encyclopedia, list payday lending under Loan Shark, stating that "if the most important characteristic of loan sharking is high interest rates and a credit product that traps debtors, then the label certainly applies." Quick Tip Payday loans are not legal in New York, and a debt collector is not able to collect or attempt to collect on loans made on payday from New York resident. In February of 2013, New York's Governor directed the New York State Dept. Financial Services to notify debt collectors that New York law prohibits the collection of payday loans. You can file a complaint with Dept. If you are a New York resident, and a collection agency attempts to collect on a loan, you should call the Department. of Financial Services. The Federal Trade Commission has a wonderful Web site about payday loan options. Consumer rights and payday loans A payday lender may try to collect the debt. The payday lender could sell the debt to an agent to collect the debt if the borrower fails to pay. If you are unable to persuade the payday lender (or collection agency) to pay off the remainder of your debt, they could sue you in order to obtain a judgement. If the lender sues and wins a judgment against you, the lender could then take steps to enforce the judgment according to the procedures required by your state law before a civil court. The wage garnishment process is the most popular method for enforcing any judgment. It is important to note that these actions of enforcement do not involve contacting your employer, contacting the neighbors, or obtaining an arrest warrant. Refusal to repay the loan is a civil matter, and not a crime. A typical threat payday lenders employ is to arrest for check fraud. This is an untrue risk unless the payday loan provider has proof that the borrower never intended to pay back the loan. It's not easy to prove. It is crucial to keep in mind that no one has ever been imprisoned or arrested within the United States for any debt since the Civil War. If a payday loan lender sells a account to a collection firm the borrower is required to repay the balance. Editor's note Comments on this webpage are closed. Check out Payday Loans for information on how to manage payday loan collection. Find information on payday loan laws and regulations within California, Florida, Illinois. Massachusetts. Missouri. New York. Texas. A federal law referred to as the Fair Debt Collections Practices Act states that third-party collector agents are not allowed to contact you after you have informed them in writing. A large portion of FDCPA regulations are extended to original creditors in several states, like Texas, California, New York and New York. For advice on how to respond to an agent of collection who is harassing you, see Advice if You're being Harassed by One. The debtor can send a cease communication demand letter to the collection agent in the event that the payday loan company decides to sell the account. (See the Bills.com Debt Self-Help Center for examples of cease and desist letters. How do you deal with payday loan collection? To intimidate the borrowers, many payday loan collectors resort to intimidation. Individuals' rights as a consumer are not affected by having debt. Payday lenders usually require the borrowers to supply their bank account numbers to make withdrawals from their accounts through Automated Clearing House. If the borrower account does not have sufficient funds then the payday lender will continue to take money. The borrower may incur overdraft fees and, in the event that the same practice is repeated repeatedly enough the bank might shut down the account. The borrower is able to close one account with a bank and then reopen another to deal with payday lenders that are constantly withdrawing funds. This is only possible in the event that the bank is able to link the transactions of both accounts into the new account. If the payday lender needs to withdraw funds, the bank will simply access the new account and take the funds out. It is crucial to check that your bank doesn't allow electronic withdrawals to be taken through an existing account, and then transferred to a new one. For more information on your rights as an New York resident read the Bills.com Article New York Collection Laws. Payday Loan in New York New York has several laws which prohibit payday loans. New York General Obligations Law (SS 5-501) provides 16% APR as the civil usury cap. New York Penal Law SS 190.40 and 190.40 imposes a 25% APR limit on criminal usury. New York law bars check cashers deferred-date cashing. Payday lenders are not permitted to be operating in New York because it is illegal to operate in the state. New York payday lenders are typically partnered with banks which are not regulated in their home states. These lenders provide loans via electronic funds transfer and claim that the local bank is brokering loans. This is known as rent-a-bank lending. The New York City Dept. of Consumer Affairs Tips about Payday Loans provides a detailed explanation of New York law, and gives suggestions on how you can avoid payday loans. The New York State Prevention of dangerous or predatory loans is also available. Additional Information about Payday Loans Read the Bills.com article on Debt Negotiation & Resolution Advice to learn more about tactics, strategies and ways to negotiate efficiently with creditors. Bills.com also provides more information on the Payday Loan Information page, and has provided answers to questions about payday loans in California, Florida, Illinois, Massachusetts, Missouri, Texas and Virginia. Payday loan companies have several legal options in the event that you fail to repay your payday loan. This includes wage garnishment, lien and levy. See the Bills.com website Collections Advice for more information about rights for creditors and debtors. See also the no-cost Bills.com Financial Planning and Budget Guide, that will help you manage your finances and you can discover more about budgeting as well as prudent financial management.