What is the law regarding payday loans if the lender is not licensed in your state?
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What is the law regarding payday loans if the lender is not licensed in your state?
I have defaulted on several payday loans. I have read that if they are not licensed in your state that the contract is void; you would only owe the amount borrowed. Is this true?
Asked on February 19, 2012 under Bankruptcy Law, Ohio
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Different states have different laws with respect to unlicensed pay day loan companies. Most states old that if a pay day company is not licensed to do busienss in the state of operation, it cannot bring a lawsuit or defend a lawsuit against it until it is licensed.
Other states have statutes holding that the loan is deemed an interest free loan to be paid back by the borrower under the agreed terms of the loan.
I suggest that you consult with an attorney who practices consumer law in your state of residence to further answer questions that you have on your pay day loan and review the loan documentation so that you can receive a more definitive answer to your question.
My initial assessment is that the interest rate on these pay day loans most likely violate state usury laws on allowed interest.
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