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Many Internet Payday Loans are Unenforceable

By Nathalie Martin

Internet payday loans are often even more impossible to pay off than storefront loans.  Internet payday lenders are also among the most aggressive collectors, but maybe not for long.  As it turns out, many of these loans are unenforceable.

First, why are they so hard to pay off?  To get an internet payday loan, you need to share your bank account information, of course.  Many loans are set up so the loan is automatically rolled over, unless the customer notifies the lender three days in advance of the due date that he or she wants to pay the loan off.  I know of one consumer who mailed a certified check for the full amount, after the three day notice period but before the due date.  The lender would not cash it.  This happened repeatedly, making the loan virtually impervious to repayment in full. 

If one gets caught up in one of these situations, the first thing to do is find a new banking relationship.  Then what?  Here is the good news.  Payday loans made by lenders who do not comply with state laws cannot be enforced.

For example, all lenders (regardless of whether they are located inside or outside of New Mexico) loaning amounts of $2,500.00 or less to New Mexico residents must be licensed by the Director of the Financial Institutions Division and comply with all of the state rules and regulations regarding such loans.  NMSA 1978 § 58-15-3(A).  Payday loans made by unlicensed lenders are void and the lender has no right to ?collect, receive or retain any principal, interest or charges whatsoever.?  NMSA 1978 § 58-15-3(E).  Most if not all internet payday lenders have failed to register, or to comply with a bunch of other requirements, such as getting a license, providing a toll free number to

New Mexico

residents, and providing funding for the examination of their records by the public. Thus, it looks like these loans are uncollectible.

Full post as published by Credit Slips on May 29, 2008 (boomark / email).