We’ve been writing about short term loans here in California for years. One of the most common questions we get is about whether or not a lender can sue someone for who falls behind on a loan. There have been instances where payday loan companies have sued borrowers who went into default to the tune of thousands of dollars. Usually, the lawsuits are not only for the principal debt amount. They include extra charges too, such as default penalties and legal fees. It is often impossible for a borrower already in a tight spot to work his way through the debt and lawsuit. In many states, lenders can charge borrowers for all legal fees. This is above and beyond the interest and principal owed. Most borrowers cannot even afford their legal representation costs.
The prospect of dealing with a lawsuit for a delinquent loan can be quite stressful for many California residents. Most people will want to take some time and consider if short term financing is the best bet for them. It is worth pointing out that you cannot be arrested for failing to pay back your debt to a lender in California. A judge may issue a warrant if you fail to appear in court, but this is only in specific legal situations. If a lender threatens you with arrest, you can report the threat to the state attorney general. Start by submitting a complaint with the Consumer Finance Protection Bureau through their website. The law allows California payday loan companies to sue to recoup owed funds. But there are regulations that prevent lenders from charging exorbitant interests. In some states payday loans are quite costly. These cash advances often have annual interest rates of between 30 and 400 percent. In such cases, if the suit against a borrower ends in judgment, the payment can be a nightmare. Under California law, the most one can borrow with a California cash advance is $300. While the highest a California payday loan lender can charge as interest is 15% of the principal, or an amount not exceeding $45. This ensures the borrower does not end up with large loans accruing high interests. Any reputable company in California will be licensed by the Department of Finance. This license ensures they will not run afoul of the State’s regulations which protect consumers like you.
You have several options when faced with a lawsuit from a online lender in California. It’s best to first understand your position with regard to the law before you hit the panic button. As always, it’s best to first check the State of California Attorney General’s Website. This site will give updated info that details your protections at a citizen of the state. The law protects you in so many ways. For instance, by California law, the payday lender or installment loan company can only charge you for one bounced check. In most cases this amount can not exceed $15. The lender cannot charge fees if you request for more time. Take note that the California payday loan lender does not need to provide you with an extension. The law further states that a payday lender should not give you a new loan, either while the existing loan has not been paid or to pay off a previous loan.
Take time to review the contract and issues such as full disclosure. The contract for most California equity loans should be in a language you used to negotiate in with the lender. If the contract language is different, you can state the lender didn’t provide full disclosure of the loan terms. Remember, it is against the law for a payday lender to threaten you with prosecution for having insufficient funds to pay the loan. You still have other legal protections as a borrower when faced with a loan repayment default suit. You can always contact the Department of Business Oversight for help with any creditor that’s causing trouble above what the law allows.
Late on an installment or payday loan in California? Try to work it out first with your Lender!
The most important thing is to avoid a lawsuit from your lender in the first place. The best way to avoid a lawsuit is by preventing the default. There are times when such problems cannot be avoided. If you should run into credit problems, call your creditors and request them to waive late fees. You can even request for a reduction of the interest rate, or find a way to work on another repayment plan. Consider seeking the services of a financial counselor that can check on your loans rates and terms. They can also review your financial situation and provide the best way forward with your California installment loan or cash advance.