Laws Regarding Payday Advances and Check Cashing

The experienced bankruptcy attorneys from Bodie, Attorneys at Law, discuss payday advances and check cashing parameters in Maryland.

Coming up short when it’s time to pay a bill can be alarming. For many individuals, check cashing and payday advances can be a viable option when trying to secure additional funds. However, before you use these services, it is important to be aware of the parameters and the substantial fees that coincide with each.

Check Cashing

A more traditional form of a short- term loan, check cashing, involves an institution allowing you to write a check to that entity and receive cash in return. Certain stores will give cash to those who pay with a check. Though they may allow the transaction to take place without an additional purchase, the store may charge a nominal service fee. This enables one to obtain cash even when their checking account would not have sufficient funds at that time. Thus, serving as a quick, small cash loan.

Technically, this process is considered ‘writing a bad check.’ The drafter has made out a check for an amount that he or she knows is not in the bank at that moment. Should the institution honor the check and give you cash in exchange, you are responsible for ensuring the necessary funds are in the bank to cover the check before it clears. If not, both your bank and the institution cashing the check may charge you with returned check fees.

On a larger scale, writing a bad check may subject you to both civil and criminal penalties. Many states impose some form of punitive damages, allowing those who received your bad check to claim as much as three times the face value of the check in damages.

Payday Advance

Equally as risky, yet a more legally sound form of a short-term loan, is a payday advance. This service allows borrowers to take out a short-term loan at an exceptionally high interest rate. To secure the loan, the borrower must provide the lender with a check or access to online banking. The borrower then agrees to pay back the loan within 14 to 30 days. The repayment date is typically set as the borrower’s payday.

Due to the often-desperate circumstances of those who use this method, payday advances tend to be more heavily regulated than other forms of financing. Yet, many fall into the habit of consistently relying on the loans to cover their regular expenses, which can become even more financially overbearing in the long run.

Government regulation of payday loans tends to protect those who would otherwise be at a disadvantage. Many states prohibit payday lenders from pursuing civil or criminal claims for bad check writing  because the lender knew at the time the check was written that the borrower lacked the funds to cover the check.

Seeking Guidance

If you are experiencing overwhelming financial stress, it may be beneficial to seek the help of an advisor that can evaluate your situation. There are many free credit counseling services across the United States, as well as various other organizations that can advise you in negotiations with lenders. These intermediaries can help to arrange for repayment terms that are more affordable and manageable than what you may be offered on your own.

An experienced bankruptcy attorney can also help with some of the necessary negotiation, as well as protect you in the event of charges or suit related to default on a payday loan. Bankruptcy may be another option to consider to erase some of the financial burden you may be facing and to get your finances in order once again.

For more information regarding the options you have regarding your financial obligations, contact experienced bankruptcy attorneys at Bodie, Dolina, Hobbs, Friddell & Grenzer, P.C. today.