Cristy

“Dear Steve,

I’m so far behind that i have 3 payday loan, and im working full time, a part time job and going to school.

How do I get a head where I don’t have to use payday loans?

Cristy”

The Answer

Dear Cristy,

Your payday loan question comes at a great time. Just this past week I had the opportunity to visit a couple of payday loan, payday advance, or cash advance stores and sit down with staff members and discuss these issues.

Your problem of having multiple cash advance loans from the payday loan stores highlights a current problem when using a payday loan store. Only in a handful of states is it required that a payday loan store or cash advance store make sure that you don’t have multiple loans outstanding. The new policy in those states is “one loan, one customer” but today, in the majority of states you could go from store to store and roll up a bunch of loans.

The store typically will not ask if you already have loans outstanding and it will become your sole responsibility to make sure that you don’t borrow more than you can afford. People are often not the best watchdogs of their finances, especially in urgent situations or difficult times.

The minute that you take out a second or multiple cash advances by writing a postdated check in order to have cash in hand right now, that’s a warning sign. Borrowing more when you can’t repay what you’ve already borrowed is a lethal blow to your financial health.

The Community Financial Services Association of America (CFSA) is a payday advance industry group and payday advance companies that are members of the CFSA may offer you an EPP (Extended Payment Plan) to allow you to repay what you owe over four payments without additional interest.

Each member will provide customers who are unable to repay a payday advance according to their original contract the option of repaying the advance over a longer period of time. Such an extended payment plan will be offered in compliance with any requirement in state law to provide an extended payment plan or, in the absence of such a requirement in state law, in compliance with the Best Practice “Guidelines for Extended Payment Plans.”

A member will adequately disclose the availability of the Extended Payment Plan to its customers in compliance with any requirement in state law for such a disclosure or, in the absence of such a requirement in state law, in compliance with the Best Practice “Guidelines for Extended Payment Plans.”

Each member shall provide an Extended Payment Plan (“EPP”) for customers who are unable to repay a payday advance. Each member will offer such an Extended Payment Plan in compliance with any requirement in state law. If no such requirement exists in state law, then the member shall adopt a plan that offers the customer at least the following provisions:

1. If you [the customer] are unable to repay your advance when due, you may opt in to an EPP to pay the outstanding advance at least once in any twelve month period. Any outstanding fee will be included in the amount subject to EPP.
2. You must invoke the EPP by close of business on the last business day before the advance due date by returning to the office where you obtained the advance or by using whatever method you used to obtain the advance. To invoke the EPP, you must sign an amendment to your agreement reflecting the new payment schedule.
3. You may pay the transaction balance in four equal payments coinciding with your periodic pay dates.
4. We will not begin collection activities while you are under an EPP as long as you meet all obligations under the EPP.
5. There is no charge for you to enter into an EPP. However, if you default on an EPP, we may charge you an EPP fee and accelerate payment on the balance remaining, as authorized by applicable law.
6. If a state has adopted a requirement for a repayment plan in state law, members shall comply with those requirements. The CFSA Best Practices Extended Payment Plan may not be available to customers in states with statutory payment plan requirements.

I have previously written about how a payday advance or payday loan could be used in limited situations and makes sense. However, the minute we start talking about rolling over payday loans or having multiple cash advances outstanding, well then we’ve got a whole different kettle of fish.

The only way to dig yourself out of the payday loan hole is going to be to get the loans paid off in full, to see if the stores you got the loans from will allow you to enter an EPP to pay them off, or go bankrupt.

Ultimately the secret to getting ahead to not have to use payday loans is to make sure that your expenses do not exceed your income. Anytime that happens then you are going to have problems. What I’d rather see you do is to stash away any extra cash you might get into a savings account. That way, in leaner times, you can reach into your savings account and borrow cash from yourself to make ends meet.

Steve Rhode

The Answer