Guide For Dealing with Unlicensed Payday Lenders

Consumers living in one of the many states that prohibit payday loans should not be offered short term loans. However, a number of unlicensed payday lenders continue to operate within prohibited states, preying upon unwitting consumers in need of fast cash. is committed to stamping out illegal payday lending practices. Our specialist network of payday lenders all operate in strict accordance with state and federal laws.

If you live in a payday loan prohibited state but have taken a payday loan from an unlicensed lender, follow our guide to know what to do about it to protect yourself.

STEP 1: The first thing you should know is that the contract for repayment for the payday loan is not enforceable if you live in a state that prohibits payday loans.  However, it is advisable that you repay the principal of the loan (i.e. the exact amount that was paid into your bank account, minus all fees and interest) to avoid the possibility of legal action against you.

STEP 2: Contact your bank and speak with a Relationship Manager to revoke ACH (automatic repayment) authorization for any payday loans that you have. If you have already repaid the principal of the loan, you will need to complete paperwork reporting fraud. Explain to the bank that the lender refuses to stop debiting your account and that you have discovered that this type of loan is illegal in your state of residence.

STEP 3: To further prevent the illegal lenders from accessing your funds, explain to the banker that you would like to close this account and open a new one that is not linked in any way to the old account. If there is a period of overlay during the closing of one account and the opening of another one, ensure that the old account is placed on immediate “deposit only” status.

STEP 4: If your bank resists your requests, simply ask to speak to a more senior member and ensure that your new account is not linked to the old account. Be aware that if the payday lender tries to make further withdrawals after you have followed these previous steps, the bank should indemnify you.

STEP 5: Contact the lender by email and notify them that you have discovered that payday loans are not legal in your state of residence or that the interest rate that applies to the loan is too high based on the law of the state. Check here for the precise parameters of the law so you are clear in the email. Inform the lender that you have revoked ACH authorization.

STEP 6: Also inform the lender of the status of repayments. If you have not yet repaid the principal (i.e. amount that the lender paid into your bank account), tell them that although you are not required by law to do so, that you are willing to repay the principal balance of the loan on your own terms. A prepaid debit card account is a good method to use.

STEP 7: If you have already repaid the principal amount, inform the lender that you will be making no further payments. Tell them to acknowledge your email with a response noting that the account has been paid in full.

STEP 8: If you have overpaid the principal, you must ask the lender for a refund of the overpaid amount. Ask them to send a check to your address but DO NOT pay the check into your new bank account. It is important that you do not give them access to your new account by depositing the check into it. Instead, take the check to a check cashing store and pay the necessary fee.

STEP 9: Finally, file complaints with your state’s Attorney General, the Federal Trade Commission and your state’s financial regulatory authority.

Good luck!

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  • Joen Click

    This is a very helpful article finale i know what to do with a lender that gave me a loan and i found he didn’t had any license.

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Please Note:Payday loans are meant to provide short-term financial relief. They are not meant to be used as long term financial solutions. Those who are facing credit and debit problems need to seek professional advice. Consumers are adviced to learn about the risks associated with payday loans,local laws and regulations governing payday loans, recent developments in thheir state, and other loan options

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