Statute of Limitations on Internet Payday Loans

Internet payday loans are like regular payday loans, only instead of visiting a physical retail location, borrowers take out the loan on a website. Also, instead of providing the lender with a postdated check, the borrower will generally provide an Internet payday lender with a checking account from which the lender can withdraw money at a later date. The statute of limitations applied to this loan will usually depend on the laws of the state in which it was issued.

Internet Payday Loans

Internet payday loans are issued over the Internet, making the question of what laws apply a tricky one. Although Internet payday loans may be available to people all over the world, lenders always have a physical presence in a particular state. In all cases, the lender will be required to have taken out a business license. Therefore, legally, an Internet loan can be regarded as identical to a loan that a person took out in person at the lender's location.

Statute of Limitations

All states have statutes of limitations on the collection of debts. After a certain period of time has elapsed, the lender can no longer seek collection of the debt. So, for example, if a loan has a statute of limitations of three years, then the lender no longer has a right to collect the debt after three years have passed. Each state has its own set of statutes for various kinds of debts.

Jurisdiction

Generally, the state that has jurisdiction over a loan is the state in which the loan was issued. In most cases, an Internet loan is issued in the state in which the lender is located. So, if a lender was located in Texas and made a loan to a resident of Massachusetts, the loan could be collected for as long as Texas' statute of limitations allowed the lender to pursue collection.

State Payday Loan Laws

Some states have specific laws related to Internet payday loan companies designed to prevent these lenders from skirting state usury laws. These laws state that an Internet lender making a loan to a resident of the state must abide by the laws of the resident's state, regardless of the state in which the Internet lender is based. In this case, the relevant statute of limitations would be from the state in which the borrower lives. Individuals wishing to check their state's internet payday loan laws should consult their state attorney general's office or consumer protection agency.