A paycheck advance offers a borrower a small loan with a short time frame that the borrower must repay by his next payday. Texas payday loans are unsecured loans, meaning that a lender cannot seize any of the borrower's property in the event of a default. If a debtor cannot pay back this loan, the payday lender may assess penalties set by the state of Texas and can pursue collection actions against the borrower.
Late Fees
Per Section 342.206 of the Texas Statutes, payday lenders may assess fines on the unpaid balance of a loan. The state allows for a maximum five percent interest penalty on any amounts unpaid 10 days after the due date of the loan. According to Section 342.257, payday lenders may instead choose to charge a delinquent borrower a five percent delinquency charge on cash advances of $100 or more with a maximum penalty of $10.
Notification
If a borrower cannot pay or refuses to pay the owed amount with late fees, the payday lender may begin collection action against the borrower. Per the Texas Debt Collection Law, lenders can contact a borrower via telephone or fax between the hours of 8 a.m. and 9 p.m. Within five days of first contact, the debt collector must send a written notice to debtor detailing the amount of money that the debtor owes and the collection action the agency will take.
Collection Agency
Payday lenders who are unable to collect a debt may sell a borrower's debt to a third party collection agency. This agency will try to convince the borrower to pay off their debt. Per Texas law, collection agencies cannot harass a borrower at their place of employment and cannot use obscene or threatening language during communication. Within 30 days of receiving their first written notice of collection in the mail, borrowers may send a letter to the creditor by certified mail to stop all communication from the creditor or collection agency. The recipient of the stop letter must cease all communication with the borrower within 30 days of receipt of the letter.
Legal Action
A payday lender or third party collection agency can choose to simply report small payday loan defaults to credit bureaus, which will damage the borrower's credit. For any size debt, a Texas payday lender can press civil charges against the borrower in order to recover their money. In the state of Texas, creditors cannot place a lien against a borrower's house, as long as his house has been declared a homestead. According to the Attorney General of Texas, a court within the state cannot garnish a debtor's paycheck for repayment of consumer debt. While the state protects a worker's paycheck and residence, a court can still file a judgment against the debtor, and the borrower will have the obligation to pay off the debt as soon as possible.
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