How to get out of illegal payday loans – 5 Easy steps for you

Dealing with illegal payday loan companies is a tough ordeal since they don’t care about the laws and milk money from the cash-strapped borrowers till they are broke.

Illegal payday loan companies are not powerful in this country. But lack of awareness about the payday loan laws amongst the borrowers makes these companies immensely powerful. They charge atrociously high-interest rates and threaten to file a police complaint when borrowers can’t repay their loans. Some borrowers feel helpless when they are unable to get out of illegal payday loans even after paying thrice more than the principal amount.

Why do borrowers take out illegal payday loans?

Most people don’t know which lenders are legal and which ones are illegal. That’s the basic problem in the country. In most payday loan forums, borrowers often list their lenders and ask experts to pick out the illegal ones. Unfortunately, they post in forums when they have already lost a hefty amount to the lenders.

How to get out of illegal payday loans in 5 steps

Step #1. Revoke ACH authorization: Go to your bank and request to meet the relationship manager straightway. Don’t discuss the matter with the teller. Inform the relationship manager that you want to revoke ACH authorization for all your payday loans and are ready to submit a revocation letter. You wish to secure your checking account as soon as you can.

Step #2. Fill out the fraud paperwork: Have you paid more than the principal amount? If so, then there is no need to make further payments. Inform the bank that the loan is not legal. Explain that you have already paid more than the principal amount to the lender. In spite of repeatedly asking the lender to stop debiting your account, he is refusing to do so. This is why you want to safeguard your account from the payday lender.

If the relationship manager is hesitant, then tell him that you are ready to close the checking account and open a new one. Both the accounts shouldn’t be linked in any way.

If it will take a lot of time to close the checking account officially, then you can do one thing. You can ask the bank to put your account on the deposit only status. If the bank still refuses to cooperate with you, then you can close the account and open a new one in a different bank.

Step #3. Send a letter to the lender: It’s time to send a letter to the payday loan company. Don’t bother about their physical mailing address because most illegal payday loan companies won’t have one. Why should you waste more time? Check out their website and find out the customer service email address. Send an email to the company and notify them 2 things:

(i) They are not licensed to do business in your state due to the following reasons:

(a) They belong to a tribal community or an organization.

(b) They don’t follow the state laws. They charge an interest rate that is too high.

(c) Payday loan business is banned in your state.

(ii) You’re revoking both ACH authorization rights and voluntary wage assignment since you have already paid the principal amount. You won’t make further payments. You expect to receive a letter where they accept that your debt has been paid in full.

If you have not paid the principal amount, then inform in your email that you’re willing to settle it. If you have paid more than the principal amount, then ask for a refund. Request them to send a refund check at your address directly. If you do receive a check, encash it in a check cashing store.

Step #4. Send emails to the bank and the HR: Inform the bank and the HR of your company that you have revoked the voluntary wage assignment. It’s better to inform them beforehand so that the illegal payday lender can’t invoke it.

Step #5. File official complaints: You should file an official complaint with the FTC or your State’s Attorney General’s office if the lender continues to harass you for payments.

How to stop illegal payday loan payments

Honestly speaking, the best way to stop payments is to close the bank account. Once you close the account, the lender can’t snatch your money anymore. Try to inform the lender on the same day you close your bank account.

An illegal payday loan on credit report – What to do

An illegal loan shouldn’t be on your credit report. The loan is illegal. The lender doesn’t have any right to report unpaid debt to the credit report. If you find an illegal payday loan or cash advance on credit report, then dispute it with the credit bureau and get it removed. You can also ask the lender to remove the listing from your credit report.


Be tactful when you’re dealing with illegal payday loan companies. Read the state cash advance laws to avoid getting manipulated by them. Don’t get intimated if they threaten to sue you or arrest you or garnish your wage. This is just a false scare tactic. They are doing business illegally and can’t serve you. Sometimes, lenders can claim that state laws are not applicable to them. Don’t buy this line because it’s false.