Category Archives: Collection Agencies

Here is the Real Problem With Payday Loans and Why They Should Be Illegal


I keep reading articles about cities trying to regulate payday loan companies with land use restrictions and other measures. While that is great news I cannot help but think payday loan companies should just be illegal altogether. States like California should just revoke payday loan companies’ corporate status and cities should revoke their business licenses. Why is it so hard to regulate what clearly is a horrible business model for those who are the consumers facing financial difficulties?

What Happened to the Time Honored Ways to Get Short-Term Money?

There have been time honored ways to obtain short-term loans when things go sideways. The first is primarily friends and family members that do not charge immoral interest rates and work with their relative or friend to get paid back. The second way is pawn shops that also do not charge immoral interest rates and are highly regulated. A third option is getting an advance from your employer. These are the time honored ways to get short-term money to get by. Today, payday loans are charging people immoral interest rates and making matters worse for people who obtain the loans. I have witnessed an interest rate of 1,000% in writing from a payday loan company. How can this be legal?

The Real Problem: People/Customers Who Get Payday Loans Have No Voice

What do I mean when I say they “have no voice?” It means justice is not free and you have to have money to get justice in this world. Sorry if this is the first time you have been told this, but it is the cold hard truth. Bankruptcy attorneys and attorneys in general can less and less go out on a limb and take cases on for a contingency fee. Even in contingency fee agreements the expenses for the litigation of the case are paid for by the client normally. Do you know how much it costs to sue for your rights being trampled? In San Mateo County the filing fee for a limited civil lawsuit ($10,000 or less in damages alleged) is $240.00 plus serving the lawsuit on the party you are suing. There are ways to serve the summons and complaint for free. Did I hear someone say small claims court? A small claims court complaint costs $181.00 to file in San Mateo County. Yeah, well, that is an option, but I have not witnessed people actually following through with doing it themselves and then enforcing the judgment to get paid if successful. Remember you do not just get a check when you get a judgment. You have to then spend time and money to satisfy the judgment. If someone is getting a payday loan they do not have the money for any of this and probably do not have the time either. How does someone take a day off from work or more for small claims court to just reduce their income further causing more hardship?

What happens when the person does not pay on time? The payday loan company violates the law when attempting to collect the debt. They harass people at work, tell them they are going to be arrested and they will go to jail, call their family members and harass them. What do people do when their rights are violated and crimes are committed against them by these payday loan companies? Not a damn thing. They have no money so they have no voice. They are just trying to keep food on the table and a roof over their head. It just keeps going on and on like this until they get sick of it and come to someone like me. I file bankruptcy for them and now there is an enforceable order of discharge to hopefully make it all go away. No more 500% interest rate. No more phone calls. No more harassment of their relatives. No more phone calls to their work.

Payday Loan Companies are the Worst When Trying to Collect

But wait, it actually does not stop there sometimes. I can tell you as a bankruptcy lawyer that the most likely creditors that mercilessly harass our clients long after an order of discharge is entered are payday loan companies and their collection agencies. Just like clockwork while I am writing this article I received a phone call from a client that we filed chapter 7 bankruptcy for about two years ago. She received a harassing phone call from a collection agency. When I say harassing I mean the person was yelling at her and being very rude. She received multiple calls at work and on her cell phone. She was told that she has two felonies against her and she would be put into jail if she did not pay them $1,900.00 immediately. I have read there are people impersonating the Internal Revenue Service doing this same thing. In this case though the collection agency was collecting a debt for guess who? It was a payday loan company. So the payday loan company fully knowing the debt was discharged in the chapter 7 bankruptcy case sold/assigned collection of the discharged debt to this ruthless law breaking collection agency. It happen all the time and more often than not the original debt was from a payday loan company.

Fair Debt Collection Practices Act (FDCPA ) and Collection Agencies


The Fair Debt Collection Practices Act controls how and when collection agencies go about collecting outstanding debts.  Congress determined that collection practices were abusive, deceptive, and unfair debt collection practices by many debt collectors.  To combat inadequacies in existing laws, the FDCPA was passed.  The purpose of the Fair Debt Collection Practices Act is to insure collection agencies do not use any abusive collection actions and to make sure there is consistent State action to protect consumers from collection agencies.  A large limitation of the FDCPA is that this law only applies to collection agencies, not the original creditor attempting to collect a debt.

What is a Violation of the FDCPA?

A collection agency may not contact a person owing a debt during an unusual time, an unusual place or a time or place that is known to be inconvenient.  A convenient time is assumed to be between the hours of 8:00 a.m. and 9:00 p.m.  A debt collector may not contact a consumer if the debt collector knows the consumer is represented by an attorney and the attorney’s contact information is readily available.  A collector may not contact a person at their place of employment if they know the employer does not allow such phone calls.  Collection agencies may not call or speak with any person other than the consumer who owes the debt or their attorney.  If a consumer sends in writing a cease and desist letter to the debt collector, the collector shall not communicate any further with the consumer unless it is to advise that the collection agency is terminating all collection efforts or a remedy to the nonpayment of the debt is being chosen.  A deb collector may not take any action to harass, oppress or abuse any person in connection with an attempt to collect a debt.  The following are defined as harassment: the use and/or threat of use of violence or harm to reputation and property; the use of profane language; advertisement of sale debt to force payment.  A collector may not represent they are attorneys or part of the State or Federal governments.

What are the Penalties for Violation of the Fair Debt Collections Practices Act?

A consumer may collect actual damages incurred by a violation of the FDCPA, but not exceeding $1,000 and the cost of the action including reasonable attorney’s fees.  The court may consider any violation of this act, the frequency and persistence of the violations of this act and the extent the noncompliance was intentional when considering if liability is present.

If you are tired of harassing phone calls, contact our Redwood bankruptcy lawyers or Fremont bankruptcy attorneys to find out if bankruptcy is right for you.  Call toll free, 1-877-963-9543 to schedule a free consultation.