What is the process for repaying a payday loan?

Payday loans are short-term loans, typically due on the borrower’s next payday. These loans are designed to provide quick cash to borrowers facing financial emergencies. In order to obtain a payday loan, borrowers must typically provide a personal check to the lender or an ACH (Automated Clearing House) authorization to electronically withdraw money from their bank account according to Consumer Financial Protection Bureau (CFPB).

Payday loans can come with high fees and interest rates, which can result in borrowers being trapped in a cycle of debt. Some states have outlawed payday loans, while others have established regulations to protect borrowers from predatory lending practices.

How do I repay a payday loan?

To repay a payday loan, you typically have to provide either a post-dated check or an ACH (Automated Clearing House) authorization that allows the lender to electronically withdraw money from your bank, credit union, or prepaid card account. The exact method of repayment will be specified in your loan documents.

Here are some key points about repaying a payday loan:

1. Understanding Your Repayment Method: If you give a payday lender permission to take money directly from your checking account, it is crucial to know exactly how much will be withdrawn and when. This information should be clearly stated in your loan agreement.
2. Repayment Depending on Loan Venue: The way you repay a loan may depend on whether you took out the loan in a storefront or online. However, usually, you provide the lender a way to repay itself the full amount as part of the loan application process.
3. Renewal Fees: Some lenders might set up payments assuming you only want to pay a renewal fee on the loan’s due date and require you to act several days before your loan comes due to pay it in full. This could result in you paying several rounds of renewal fees while still owing the entire original loan amount.
4. Understand the Total Cost: Ensure you understand how your loan will be repaid and how much the loan could ultimately cost you before agreeing to get any type of loan.
5. Dealing with Payment Issues: If you have problems with a payment authorization, such as the ACH was unauthorized or revoked, contact your state regulator or state attorney general. You can also submit a complaint to the CFPB online or by calling (855) 411-2372.

Remember, payday loans can be a costly form of credit and should be used responsibly. Always make sure to thoroughly read and understand all loan agreements before signing.

What is an ACH authorization for Payday loan repayments?

An ACH authorization is a payment authorization that gives the lender permission to electronically take money from your bank, credit union, or prepaid card account when your payment is due. You can revoke this authorization.

What should I know about ACH authorizations for payday loans?

• Consumers usually are asked to provide the payment authorization as part of the process of getting the loan.
• There are a variety of payment options for payday lenders to obtain repayment. Some lenders frequently obtain multiple types of authorizations, such as taking a post-dated check along with the consumer’s debit card information.
• Under federal law lenders cannot condition a payday loan on obtaining an authorization from the consumer for “preauthorized” (recurring) electronic fund transfers.

What should I do before I sign an ACH authorization for payday loan?

• Read your loan documents carefully before signing them.
• Make sure that the “ACH authorization” states clearly how it can be stopped or revoked.
• Know exactly how much will be deducted from your account and when.

What should I do if I have problems with a payment authorization?

If you have problems with a payment authorization, such as the ACH was unauthorized or revoked, you may want to contact your state regulator or state attorney general. You can also submit a complaint to the CFPB online or by calling (855) 411-2372.

What protections are available for borrowers?

Active duty servicemembers and their dependents are protected under the federal Military Lending Act (MLA). The MLA places a cap of 36 percent on the Military Annual Percentage Rate (MAPR) for payday loans and other consumer loans. Additionally, the MLA places other limitations on what lenders can charge for loans.

Borrowers can also seek help from state regulators or state attorney generals in states where payday lending is permitted or regulated. These authorities may be able to provide information on lending restrictions and consumer protection laws.