Payday loans offer good opportunities for quick borrowings. However, such transactions are still not properly regulated. Many lenders don’t inform borrowers about hidden charges beforehand. They may also charge 400-800% interest, which is more than 30 times the legal rate.
If you have faced such issues or have paid more than you owe, a class action can help. This lawsuit will help you get back money when you overpay in interest. So, knowing this will be helpful if you are already struggling with payday loans or are planning to get one.
What Are Class Actions?
You need to focus on the term “class”.” Unlike other lawsuits, it lets multiple people sue a company together. Usually, when many borrowers have faced the same issue, they can come up together and file a lawsuit against the company. A lead plaintiff will represent the group. Class action settlements are legal in every state. However, they require court approval to ensure fairness.
How Payday Loan Class Actions Work?
Class actions can be an effective way to get your money back, especially if you are already drowning in payday loans. Here is how it works:
1. Starting or Joining A Class Action
First, you need to start a class action or join an existing one. In many cases, class actions originally begin with a single plaintiff. If you feel you have been scammed, then find others like you who were framed by the same company.
2. Identifying the Issue
It’s important to clearly mention the types of issues you have faced. Whether it’s unfair fees, high interest rates, or illegal loan terms, hidden policies can also be included. Include all types of issues faced by your group to strengthen your case.
3. Finding A Lawyer
The next step is to find an attorney who will represent you in court. Look for someone with experience in payday loan settlements. They may help you get a better proposal from the company faster. The lawyer submits the case in court with a lead plaintiff’s name to represent the group.
4. Croup Approval
Now, it’s up to the court to decide if your case meets class action rules. If it does, then the lawsuit moves forward. The affected borrowers are notified about their right to join or opt-out.
5. Settlement or Trial
The lawsuit can end in a settlement or go to trial. Usually, a settlement is faster and better for both parties. Companies can save their reputation from being harmed or affected. It also guarantees better payment for victims. Though a trial can lead to higher payouts, it takes longer.
When Can You File a Class Lawsuit Against a Payday Lender?
Lately, payday loans have become quite a popular option among borrowers. The process is quick, and there are many trusted payday loan apps, though banks don’t offer payday loans. You can file or join a lawsuit against the lender if:
1. Illegal Interest Rates
Payday loan interest rates are regulated by state and federal laws. While the ideal rate varies for different states, it’s still quite affordable. The CFPB, or Consumer Financial Protection Bureau, is responsible for overseeing payday lenders.
In some states, the legal APR can be 36% or higher. Yet, many lenders may ask for higher rates, as high as 400%! Some lenders may not even disclose the real APR before providing the loan. If your lender is asking for such illegal rates, you can file a lawsuit against them.
2. Hidden Fees and Unfair Terms
Lenders have to explain everything to you before issuing the loan. It’s your right as a consumer. However, some loan providers may keep policies hidden. They intend to frame you with hidden fees. Others may have unfair terms that violate your rights. If you notice or experience any such things, then filing a lawsuit might help.
3. Fraudulent or Misleading Practices
You have the right to ask all types of relevant questions and the lenders have to answer them with honesty. When a payday lender lies about costs, repayment terms, or loan approval, you can take legal action. Take written documents from the lender for solid evidence. That’ll also help you get a better settlement deal.
4. Unauthorized Withdrawals
Payday loan money lenders often take permission for wage garnishments. You give them the right to withdraw money from your account. This way, the lender protects his provided money. But if you feel unsafe, you can stop automatic electronic debits.
You have the legal right to sue the company if they still withdraw money from your account. This will be an unauthorized transaction, and a money return is very much possible with the necessary evidence.
5. Loan Rollovers or Debt Traps
The borrowed money in payday loans usually is not a big amount. Yet, due to high APR, most borrowers fail to repay the money. This leads to a debt trap, as you may need to take another loan to repay your current loan. Filing a lawsuit might help when lenders push repeated rollovers.
How to Participate in a Payday Loan Class Action?
Start by checking if a class action already exists. This will make the procedure easier for you since there are already victims assembled. Law firms or legal websites list their active cases. If qualified, you can join by signing up through the law firm handling the case.
If no lawsuit exists, talk to a lawyer. They will review your case and check if others have similar complaints. If enough people are affected, they may file a new class action.
Once a case is approved, you will receive updates. You may need to provide loan documents as evidence.
Benefits and Drawbacks of Payday Loan Class Actions
Whether you should file a class action or not depends on personal preferences. Knowing both its pros and cons might help. The benefits include:
- The legal costs for borrowers are quite low. You will find lawyers who work on a no-win, no-fee basis. So, you don’t have to pay anything upfront and pay no money if the case result goes against you.
- You have a higher chance of getting a settlement in a class action. A strong case with many victims can pressure the lenders to settle.
- There are no individual risks associated with it. The lead plaintiff and lawyers handle everything.
Drawbacks of payday loan class actions include:
- Often it takes time to settle a case, lasting from months to even years.
- The final compensation may be lower for individual payouts as the money is split among all members.
- You have limited control over the negotiation and cannot negotiate your own settlement.
Conclusion
Payday loan class settlements help borrowers get their money back when they are framed by a lender. Since it won’t cost you any money to join a class act, it’s convenient. Besides, with multiple victims together, the lender is often pushed for a settlement. Make sure you have all the necessary documents to support your claims.
