Internet payday loans operate similarly to brick and mortar payday loan operations and follow the same laws. If you took out a payday loan over the Internet, then on a prearranged day, usually your payday, the lender will take the money to cover the loan directly from your bank account. If the money is not in your account, you are considered in default. Since payday loans can have an annual percentage rate of over 300 percent, the interest can accumulate quickly once you default.
State Law
Research the laws in your state concerning payday loans. Even though the lender may be located in a different state, it must follow the consumer protection laws of your state. Some states have interest rate caps on payday loans. If the annual percentage rate for the loan is more than the cap amount, the loan is unenforceable. Some states require that payday lenders make payment arrangements with you if specific circumstances are met. Both the caps and the payment arrangement requirements vary from state to state.
Debt Holder
Just because the loan was with a particular lender does not mean that lender has the right to collect the debt. The debt may have been sold to a collection agency, or a collection agency might be attempting to collect the debt on behalf of the lender. Determining who holds the debt and who has the right to collect it lets you know with whom you should make payment arrangements. You do not want to pay the wrong entity. Once you determine who holds the debt, call the creditor and ask about payment arrangements. The creditor might say no, but asking does not hurt.
Lawsuits
In the worst case scenario, the payday lender or a collection agency will sue you. If it can prove that you owe the money, it will be granted a judgment against you. Depending upon the laws of your state, this allows the lender or agency to garnish your wages and levy your bank account. Fortunately, courts will usually allow you to make payment arrangements as long as the payment amounts are reasonable. If you receive notice of a hearing, go to court at the appointed time. Attempt to negotiate payment arrangements with the lender's attorney and have the judge approve any agreements.
Acknowledgment
You should always pay your debts if you can. Not paying them results in a lower credit score, which hurts your ability to borrow more money and possibly secure employment. However, do not enter into any payment arrangements that you know you cannot afford to make. Lenders have a limited time to sue you for the debt. The time period varies between states but is normally between two to five years. If you acknowledge, either in writing, a recorded phone conversation or by making a payment, that you owe the debt, the time for the lender to sue resets. If the lender runs out of time before filing a lawsuit against you, it cannot collect on the debt.
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