Payday lenders are undoubtedly
smart. Payday loan companies approve loans for hundreds of borrowers everyday
yet have also found a way to make sure they always get paid. And what better
way to do so than to automatically debit your bank account on your payday? They
know you will have the money because you just got paid and they take advantage
of this by debiting you a couple of hours after you get your money deposited.
By doing so, they collect their funds before you even get a chance to put your
hands on your hard-earned money. With a blink of an eye, your paycheck is gone
and you have no other choice but to take out another payday loan to get you
through until your next payday. And two weeks after, the same thing happens all
over again. Sadly, this is the story of almost everyone stuck in the payday
loan trap.
If you look at the problem closely,
the solution is fairly simple: Close your bank account.
But not all payday loan consumers
have the privilege of easily closing their accounts. The most common reasons
why some people might not want to close their bank account is: A) they get
direct deposit, B) they pay other bills with the account, or C) they have a
negative balance. This article discusses how you can keep payday lenders
away from your money without closing your account.
A.
If you are expecting a paycheck by direct deposit soon, you probably would not
want to close your bank account. The solution here is simple: Put a
freeze on your account. A frozen account simply means that only cash
and check deposits are allowed and any withdrawals are prohibited. As a matter
of fact, you cannot use your debit or ATM card either. Simply put, putting a
freeze on your account means that your paycheck will still be direct deposited
into your account but your payday lenders will not be able to debit you. If you
are in this situation, the best approach you can take is to put a freeze on
your account BEFORE your payday. As soon as you get paid, you can withdraw your
money and close your account immediately. You may then open a new account
(preferably with a different bank) and make sure to let your employer know of
the changes right away. This will give your employer enough time to change your
direct deposit information on file so that you can rest assured that you will
receive your next paycheck without any problems.
B.
If you cannot close your account because you use it to pay other bills, you can
set up an arrangement with your bank to put a "hard block"
specifically on your payday lenders. First, you need to compose a letter
for each of your payday lenders stating that you are no longer authorizing them
to debit your account automatically. According to the Electronic Transfer Act,
15 U.S.C. 1693 et seq., you may revoke any company's right to debit you
electronically (even if you have previously allowed them to do so) as long as
you provide them with a written document stating they no longer have your
consent to withdraw money out of your account. Make a copy of these documents
before sending them to your payday lenders (you can send them by e-mail, fax,
or mail) and take the copies to the bank with you. Letting your bank know that
your lenders are not authorized to debit your account makes the process of
putting a "hard block" even easier. To help you out, you should also
print out one of your past statements, circle or highlight the names of the
payday lenders, along with the payment amount that the lenders usually
withdraw. Having a "hard block" in place can allow you to use your
account as you usually do, with the benefit of your payday lenders no longer
debiting you.
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