This article is written by Peters and Associates
I needed help paying some bills, so I took out a payday loan. I made my interest payments but couldn’t pay it back in full and wound up having to take another loan. And then another. Now it seems like there’s no way out, and I still can’t pay off my original bills. Is there any way you can help me? — Veronica R., Las Vegas
The first thing you need to know is that you’re not alone. We get calls and emails about this problem every single day.
Despite headlines that shout “The Economy is Improving,” thousands of Clark County residents struggle to pay their bills.
Several, like you, turn to high-interest lenders hoping to get a leg up and get back on their feet, swearing up and down that this is the last, and only, time they’ll need a short-term solution. And why not? Marketing for these companies make it seem like with one small, easy loan, everything will be OK. Unfortunately, it doesn’t always work out that way.
Payday loans can be dangerous because of their high interest rates. $2,000 x 400% = $8,000 of interest in one year!
While Nevada doesn’t ban high-interest loans like Georgia, New York and New Jersey do, our state does regulate the industry through NRS 604A. Our state laws don’t cap the interest rates payday loan companies can charge — most short-term interest rates are north of 300 percent — but Nevada does limit the amount companies can lend, the number of loans they can provide and the fees they can assess. There even are restrictions on the types of collateral high-interest lenders can accept and on the collection actions they’re allowed to take if you default. Moreover, all debt collectors are bound by the contacting-the-debtor rules found in the Fair Debt Collection Practices Act (FDCPA).
With such specific laws in place, violations of NRS 604A and the FDCPA are common, even if they’re rarely enforced. Sometimes, violations can lead to debt or interest being lowered or wiped out entirely. For severe violations, the lender may wind up having to pay your legal fees and owing you money.
Even if your lender isn’t in violation of consumer protection laws, there still are options to break the payday-loan cycle. The options range from reducing the high interest with a more workable repayment plan to bankruptcy. What’s right for you depends on what other debts you have, your income level and your short- and long-term goals.
Remember though, if you get sued by creditors and they win, a judgment on your credit report is worse than filing a bankruptcy.
That said, whether a lender calls its high-interest/short-term products “payday loans,” “title loans” or “signature loans,” such products almost always lead to an endless debt cycle that eventually involves attorneys, lawsuits and/or bankruptcy.
Please note: The information in this column is intended for general purposes only and is not to be considered legal or professional advice of any kind. You should seek advice that is specific to your problem before taking or refraining from any action and should not rely on the information in this column.