Legal Question in Credit and Debt Law in Pennsylvania

I have been working with a debt consolidation company for payday loans. I was told by a creditor they will use file paperwork, come to my place of employment, and sue me in court. I felt bullied and set up a payment arrangement only to be told it was being taken care of. The consolidation company is stating they are taking care of my problem. I don't know who to believe and needed advice quickly.

Asked on 5/02/13, 11:38 am

1 Answer from Attorneys

The question is why are you doing this?

Payday loans are virtually illegal in PA. Here is a link to a brief article I wrote:

To be legal in PA a payday lender has to be registered with the state in order to charge the high rate of interest. If they are not registered, then they can only charge you a maximum of 6% interest.

I am concerned about this debt consolidation place and what it is they are doing for you.

I am also concerned that this payday lender is lying.

Are you going through debt consolidation or debt settlement? Debt consolidation (like through a debt management plan) fixes your interest rate on all your credit cards/loans. Creditors are not obligated to work with debt consolidation companies at all.

Payday lenders do not come to your place of employment. Why would they? There is no wage garnishment in PA. Payday lenders, like other creditors, have the ability to sue. Will they do that? Not if they are an illegal collection agency. Its not profitable for payday lenders to lower their exorbitant interest rates and either register to do business in PA or allow for only 6% interest. Given that they violate the law, by suing you they would have to admit they are doing the loans illegally and that would open a can of worms to them being sued by the state attorney general. So a lawsuit is unlikely. Even if they could legally sue, the question is whether they will be able to collect. Depending on your assets, the answer may be no. And if this is an overseas payday lender suit is very unlikely.

Setting up a payment arrangement was foolish unless you have something in writing. I definitely would not be getting advice from the payday lender; as they have every incentive to lie. If you do not have a written agreement with the payday lender, then I would close your bank account if you have given them access to it. I would start saving the money and when you have the funds, I would negotiate a settlement of the debt with them. If they are an illegal lender, I would pay them the principal that you borrowed plus the statutory rate of 6% interest. I would not pay them a penny until you get a settlement letter in writing. If they will not agree then they do not get paid. If they do not like it then report them to the PA attorney general.

Regarding the debt consolidation company, I would have your agreements reviewed by an attorney. Is this place a non-profit agency? Or someone else? There are lots of scam companies out there and I question whether they are doing anything for you.

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Answered on 5/02/13, 1:02 pm

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