LaBre on Law: State rules govern payday loansPublished 2:42pm Monday, June 10, 2013
“I’m scared, Mr. LaBre,” she said.
“What’s the matter?” I asked.
“This guy, he said that he would be seeking a felony warrant on me!”
“Well, I went and got a ‘payday’ loan from him. I had to give him a postdated check for the amount I borrowed, plus his fees.
“Well, when I got paid, I had to buy food for my baby and me, and then my baby got sick and I had to pay the doctor. There was no money left, and so my postdated check bounced. He called me, all mad, and said that he was going to get a felony warrant on me!
“He also said that he’d sue me for three times the amount of the check in addition to putting me in jail.”
“That’s it?” I asked. “There’s no more to it than that?”
“That’s all there is; isn’t that enough!” she exclaimed. “If I go to jail, who will take care of my baby?”
“Well, then don’t worry. Under Section 38(4) of a 2005 Michigan law, called the Deferred Presentment Service Transactions Act, he can’t seek any criminal penalty against you if your check is dishonored.”
“Are you sure? He said that he could do that. How come he’s saying that he can, and you’re saying that he can’t?”
“Well, let’s look at it. First of all, do you remember seeing a copy of a notice in big type posted in his place of business which told you about your rights under Michigan law?”
“I didn’t see anything. But, to tell you the truth, I was so nervous about getting a payday loan that I didn’t look, either.”
“OK. Well, he’s required to post that notice. So, did he give you an agreement to sign before giving you the loan?”
“No. All I signed was the post-dated check.”
“Well, before giving you the loan, he was required by Section 32 of the act
to give you a written agreement. That agreement had to contain, in addition to your
obligations to repay the loan, and a description of the fees which you would be charged, the following notice to you: ‘State law prohibits us from using any criminal process to collect on this agreement.’ ”
“Like I said, he didn’t give me any agreement to sign.”
“Then all that I can say is that he’s violated the law on the one hand, and that the
law prohibits any criminal charge being brought against you on the other hand.”
“How about his threat to sue me for treble damages. Can he do that?”
“No,” I said. “In 2010, the Michigan Court of Appeals decided a case which said
that, for those firms which give payday loans, treble damages can’t be charged. All that can be charged back to you is a $25 bounced check charge and the actual amount of the loan.
“However, you may not have to even repay that loan.”
“I borrowed the money, and my check bounced. How can it be that I may not have to repay the loan?”
“The act requires those who give payday loans to be licensed. It also requires
them to both post the notice I told you about and requires that you sign the agreement I mentioned. If the payday lender fails to do all of that, then, under Section 53 of the act, you can sue him to recover your actual damages and an amount equal to the service fee you paid. Furthermore, if you win, he would also have to pay your attorney fees.”
“I really don’t want to go to court. Courts make me more nervous than dentists.”
“If you don’t want to go to court, you can still complain to the state. The state could then, based on its findings, fine him somewhere between $1,000 and $50,000 for each.”
“Do you mean that, instead of going to court I can just write to the state and make all of that money? Wow!”
“No, it doesn’t mean that.
“If the state fines him, the state keeps the money. But it certainly would cause the payday lender to reconsider his business practices if he was facing a stiff fine for noncompliance.”
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