Granting your lender full access to your checking account and reviewing the ominous fine print in an Internet payday loan contract can make it seem like getting out of a bad deal is impossible. While options such as negotiating for more favorable repayment terms or applying for a debt consolidation loan might be possible, you’ll still be left legally responsible for repaying the loan -- even if it’s indirectly.
Although bankruptcy is another option, it might not make sense to ruin your credit for the next 10 years simply to get out of an Internet payday loan. In addition, depending on your financial situation, you might not even qualify to file a Chapter 7 bankruptcy petition, which would eliminate the debt.
However, Internet payday loans are illegal in a number of states and highly regulated in many others. As of 2015, these states are Arizona, California, Ohio, Montana, Arkansas, New York, Pennsylvania, West Virginia, Georgia, New Hampshire, Vermont, Massachusetts, Connecticut, New Jersey, Maryland and the District of Columbia. If you live in one of these states, getting out of the deal completely and legally might be possible.
Review your state’s payday loan laws to whether Internet payday loans are illegal in your state. If they are legal but regulated, check to see whether the interest rate on the loan exceeds the maximum rate allowed by your state. A payday loan that either makes illegal loans or that violates usury laws can't hold you legally responsible for paying the debt.
Log into your online loan account and print the terms and conditions, along with any other disclosure documents the company provided.
File a consumer complaint with the Attorney General office in your state. Enclose supporting documentation, including contact information for the payday loan company, a copy of your loan contract, bank statements highlighting withdrawal dates and amounts, and any written correspondence such as collection letters.
Speak with a manager at your current bank and tell him you want to hard-close your checking account. A hard close means that your bank will deny any further charges, so make sure you leave nothing outstanding before the account closes.
Open a new checking account. The Consumer Federation of America recommends that you open a new account at a different bank to make sure the payday loan company can’t access your money.
- If the payday lender continues collection efforts, explain that you filed a complaint with the state Attorney General and they should contact that office in the future. Tell the lender **explicitly** they should not contact you in the future.