Payday loan companies tempt the most necessitous borrowers with quick money. It appears to be quite easy to fill out an application on line and get your money in short order. Here is what you don’t but should know about Payday loans; they often farm the collection of these accounts out to offshore companies that threaten and harass consumers. . Unfortunately, when the Payday Loan companies farm out this information, they send it off with your name, address, social security number and names of your relatives and contacts. These offshore companies frequently are in South America.

I frequently get calls from frantic consumers who have defaulted on a payday loan only to be contacted by some dirtbag threatening arrest and immediate seizure of their assets. It usually takes me about five minutes to calm these people down. Once I explain that they are not going to be arrested nor are they going to have their assets immediately seized, I explain the facts of life about Payday loans.

Payday Loans – the birth of a sleazy industry

The Payday Loan industry has sleazy history. Many of the lenders in this group started out as party store owners who would cash checks for their customers by charging a percentage of the check. Some people saw the benefit of taking people’s checks on payday and began loaning money at extortionate rates. Ultimately,when the payday loan borrowers would bounce checks to the lenders on the repayment of their loans, the lenders would then file a lawsuit under state laws. Many states have laws that allow lenders to sue for three times the amount of a bounced check. Many states stepped in and passed laws that either legislated payday loan companies out of of existence or highly regulated them. In Michigan and many other states, the interest rates and fees charged by payday loans are now almost reasonable. Moreover, these lenders cannot sue for three times the amount of a bounced check anymore.

Many Payday Lenders turn their accounts receivable over to collectors who are outside of the United States

In the United States, debt collectors are governed by the Fair Debt Collection Practices Act (“FDCPA”). Under this statute, debt collectors cannot lie to you. They cannot threatened you and there are many other things that they cannot do in connection with the collection of a debt. If debt collectors violate this law, they can and often are sued. Many in the Payday Loan Industry have farmed out their collection work to off shore companies. These collectors are not governed by the FDCPA. They have a tendency to lie, threaten and harass consumers. I have even had phone calls from people who were uncertain as to whether they owed any money, but still paid the money demanded of them by the offshore collection company because they were that intimidated.

Some payday companies have reincorporated under the laws of Indian Tribes.

Sleazier, if not ingenious, is how the Payday Loan industry has fought back against the United States Government. Many of these companies have reincorporate their businesses under the laws of some Indian Nations. By doing so, they claim sovereign immunity to the laws of the state in which they operate. This is a fancy way of saying that because they are governed by the Indian nation, the FDCPA and state law has no applicability to how they operate. In March of 2011, the Colorado Supreme Court remanded a case back to the trial court to determine whether state law can regulate Payday Loan Companies in that state. See State ex. re. v Suthers.

What do do if you are contacted by a Payday Loan Company for payment

First off, you should note that if the collector comes out swinging at you on the telephone, you can be reasonable sure that you are dealing with an offshore company. You can ignore everything they say. In fact, my best advice to you is simply hang up on them. If they call back, you may consider letting them know that you know that they are outside of the United States and that there is NOTHING they can do to collect anything from you. Even if the debt collector is in the United States you should know that you are NOT going to arrested and that they CANNOT take your car. They can’t do anything until they get a judgment against you. Now that most states have taken away their ability to sue debtors for three times the amount of the check, it is almost impossible for them to find attorneys to sue consumers.

If you have been harassed or bullied by a debt collector or have items on your credit report that do not belong on it, please call or email Attorney Gary Nitzkin at [email protected] or call (888) 293-2882 for a free consultation. For more information about our firm visit We have a large number of self help videos that discuss your rights as a consumer.