New York Payday Loans: WHAT YOU NEED TO KNOW

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Payday loans are illegal in New York State. It is a violation of New York State law to make payday loans in-person, by telephone, or over the Internet. It is also illegal for a debt collector to collect, or attempt to collect, on a payday loan in New York State. 

File a complaint with the Department of Financial Services at (800) 342-3736 if you believe payday loans are being made in New York or to New York residents, or if a debt collector is seeking to collect on a payday loan in New York.

What is a Payday Loan?

A payday loan is a relatively small, high-cost loan, typically due in two weeks and made with a borrower’s post-dated check or access to the borrower’s bank account as collateral.

Payday lending is illegal in New York for a number of reasons:

  • Payday loans are designed to trap borrowers in debt. Due to the short term, most borrowers cannot afford to both repay the loan and pay their other important expenses.
  • If the loan cannot be paid back in full at the end of the term, it has to be renewed, extended, or another loan taken out to cover the first loan. Fees are charged for each transaction.
  • The annual percentage rates on payday loans are extremely high, typically around 400% or higher.
  • Lenders ask that borrowers agree to pre-authorized electronic withdrawals from a bank account, then make withdrawals that do not cover the full payment or that cover interest while leaving principal untouched.
  •  If the lender deposits a repayment check and there are insufficient funds in the borrower’s account, the borrower is hit with even more fees for insufficient funds.

New Yorkers should steer clear of payday loans. If you are struggling to pay your bill:

  • Ask your creditors for more time. Find out what they charge for late payments, finance charges or interest rates since it may be lower than what you might end up paying for a payday loan.
  • Work with a community development credit union or a non-profit financial cooperative, which may provide affordable small-dollar loans to eligible members.
  • Ask for a salary advance from your employer, or borrow from family or friends.
  • Consult social service agencies, they may have programs to help with food, housing and home heating costs.

To stop recurring bank account debits to a payday lender, take the following steps:

Contact your bank or credit union and provide an oral or written request to stop payment to the payday lender. Your bank or credit union may require written confirmation of your request. Include your contact information in your request so that the bank or credit union can get in touch with you if necessary.
Revoke the authorization for the payday lender to withdraw money from your account. Follow the instructions in any paperwork you received from the payday lender, or send the payday lender a written notice with these instructions: “My authorization to withdraw money from my account is revoked.” Include your contact information.
Then send a copy of this written notice (revoking authorization and stating that the lender’s authority to withdraw payments from your account has been revoked) to your bank or credit union.
Inform the bank that you would like to contest any prior withdrawals by the payday lender as unauthorized since the payday loan is illegal, void, and unenforceable in New York.
After you have made a stop payment request, a lender may continue to try to withdraw money from your account, sometimes using multiple payment systems. You should continue to monitor your account closely. If you see a withdrawal from the payday lender, contact your bank and explain that you previously requested to stop payment and that the lender is still trying illegally to withdraw money from your account.
If you need to contact your bank again, discuss any fees that the bank may charge, and make sure the bank knows that the unauthorized withdrawals are due to the repeated actions of an illegal lender. In some cases, banks may waive stop payment fees.
In the event that you take the steps set out above and your account is still being debited, you may want to consider closing your account and opening a new one.

 

New York Payday Loan

The State of New York has outlawed the practice of payday lending. It is against New York State law to make payday loans in-person, by telephone, or over the Internet. You should also know that it is illegal for a debt collector to collect, or attempt to collect, on a payday loan in New York State. If you've been a victim of an illegal lender or an unscrupulous debt collector please contact the New York Department of Financial Services at (800) 342-3736. 

For emergency car repairs or other unexpected expenses that otherwise would have to wait until your next payday, and thereby cause you significant inconvenience, you may be eligible for a Personal Loan (from companies like LendingClub) instead of a Payday loan. Payday loans are meant for short-term and urgent needs such as car repair, repayment of personal debts, emergency cash, gifts for that surprise wedding or an unexpected financial loss. Payday loans are meant to be repaid quickly, within a couple of weeks; they are not long-term loans and are, therefore, regulated differently than a Personal Loan or Bank Loan.

PAYDAY LENDING IS ILLEGAL IN NY

New York State bans payday lending through its longstanding criminal and civil usury laws.  It is illegal for any lender to make payday loans, whether in person, by telephone, or over the Internet.  It is also illegal to collect on payday loans in New York.

Why does New York State ban payday lending?

Payday loans are extremely expensive. The annual percentage rates (APRs) on payday loans are often 400% and higher!
Payday loans are designed to trap borrowers in a long-term cycle of debt, even though they are advertised as short-term loans.
Loans are not made based on a person’s ability to repay them, and most borrowers cannot afford to repay payday loans and still cover their basic expenses.
Borrowers therefore frequently end up taking out repeated loans, paying a new fee each time, and still owing the original loan amount.
If borrowers do not have enough money in their bank accounts when the payday lender attempts to withdraw payments, their banks typically charge high insufficient funds and/or overdraft fees.
Payday lenders take advantage of people struggling to get from paycheck to paycheck.
WHAT CAN I DO IF I BORROWED A PAYDAY LOAN IN NYS?

Now that I know payday lending is illegal here, do I have to repay the loan?

No. Because New York prohibits payday lending, payday loans are void and unenforceable in the state. In other words, you have no legal obligation to repay the loan. Payday lenders, banks, and other debt collectors may not seek to collect on payday loans in our state.

Can my bank or credit union help me stop payday lenders from taking money out of my account?

Yes. Banks and credit unions must stop all payday lenders’ withdrawals upon your request. You may also wish to close your account, to ensure that payday lenders cannot continue to access it, and open a new account at another bank or credit union.

What can I do if I receive an illegal payday loan, or am being pursued by debt collectors on an illegal payday loan?

File a complaint with city, state and federal regulators, including:

  • NYC Department of Consumer Affairs — Call 311.
  • NYS Department of Financial Services
  • NYS Attorney General’s Office
  • Consumer Financial Protection Bureau