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  1. Why Me! Why Me!
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    How PayDay Loan company collect money from their customer?


    Hi

    I'm hoping to set up a PayDay Loan company but there are something I don't understand is how they actually collect their money back from their customer?

    Can someone tell me more about it. Thanks
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    Is someone already doing this?

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    Try running a google search on this... devshed wont have many replies
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    Thumbs down


    Translation: I want to make a hefty profit from underpriveledged people.
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    That might be blunt, but here is the business model:

    * You do not want your customer to repay the loan, ever.
    * You charge a seemingly competitive annually compounded rate, except the catch is you compound it weekly (or even daily).
    * After the customer falls for it, they realize they can just pay you off $10 a week forever and forget about it.
    * After four months, their payments already account for the advance and they still owe you the principal.
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    Those "We Finance Anyone" used car dealers work under largely the same principle. They don't really care if you ever pay off the car, because if you default they repo the car and sell it again... and again... and again...
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    good point there!

    Smart strategies
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    How PayDay Loan company collect money from their customer?


    I can tell you, as my wife works at one:

    1. customer comes in to get a PayDay loan
    2. customer must have documentation such as photo ID, pay stubs (I think 2-3 months worth) and a print out of their checking account. No checking account - no loan
    3. customer must also provide a whole bunch of referneces. These references are phoned right there while the customer waits to verifyu the referecnes are good.
    4. The checking account is also verified as well as the income on the paycheck stubs.
    5. The checking account must be at least 6 months old.
    6. The paycheck that the customer gets from their employer must be a direct-deposit - if not, no loan
    7. The customer signs an agreement, and part of the agreement stated the loan company will do a direct transfer for the loan amount on the customer's payday from the checking account
    8. The customer is charged a huge intersted rate, 300%.
    9. Customer gets a PayDay loan for $500, then gets the entire amount deduceted from their checking account, plus 300% interest.
    10. The customer's checking balance is now short the $500 plus interest, customer can not pay all bills, and then re-applies for another PayDay loan, and goes thru the same cycle, unable to get out of the trap.

    This is almost like legal loan-sharking. My wife hates it and is trying to find a new place to worrk, but jobs are tight.

    The PayDay company also offers loans for car titles. and works the same way, except if you can not pay the loan, and you do not have the funds on your checking account, they take your car and sell it.

    I can not imagine why anyone who has any morals or values would want to start this type of business, and you are preying on the poor, and making thier money issues worse...
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    Sort of a follow up...

    Those references you give whenever you get a loan, those are used to hunt down the collateral/you if you default/try to hide.

    I know this because they were all listed as places to look for the car when I did repossession and skip tracing work.

    And, while I do feel that these types of businesses take advantage of the poor, it must be said that no one is holding a gun to their head and forcing them to make horrific financial decisions.
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    Originally Posted by JamesHendrix
    7. The customer signs an agreement, and part of the agreement stated the loan company will do a direct transfer for the loan amount on the customer's payday from the checking account
    Just something i dont understand is what happen if the customer got other loans in his hand? Does the loan company got the priority first? or it had to be stated on the agreement that a portion of the customer's pay must be reserved for the loan company? And does it cost anything to direct transfer?

    Thanks
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    There are times when the customer does not pay the loan, and the customer closed the checking account before the transfer was to take place.

    When this happens, all the references the customer listed are contactad all the time until the customer pays up. The references will get tired of the calls and hopefully put pressure on the customer to pay the loan. That is why the customer must provide several references that are checked while waiting approval.

    I am not sure if there is a cost for the transfer but would think the loan company would have to pay. I am sure the 300% interest would more than cover any bank transfer fees.

    As far as other loan companies and priorieties, there are no priorities, just who can ever get the money first. I would also guess that these type's of loan companies would have some kind of blacklist that people who do not pay are put on...I will ask the wife and she what the load company does for those who do not pay...

    Originally Posted by Sim_Charlie
    Just something i dont understand is what happen if the customer got other loans in his hand? Does the loan company got the priority first? or it had to be stated on the agreement that a portion of the customer's pay must be reserved for the loan company? And does it cost anything to direct transfer?

    Thanks
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    Somebody needs a $500 loan, so they agree to pay $1500 for it? How far down the road after the initial loan is transacted does this happen? Also, I have a hard time believing anybody can legally charge 300% interest. Another thought; if that $2000 is deducted from the person's account 3 months after the loan was made, they would actually be paying 1200% interest, since interest rates are normally stated based on an annual rate.


    I dunno... I have no argument with the idea that this is an extremely poor financial decision on the customer's part (I used to work for Rent-A-Center; similar concept), but it seems a little over-stated. Is the contract really that extreme?

    Just my 2cts.
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    300% - guaranteed!!

    There is has been some investigations by the local tv station reporters who help consumers, and they went undercover to one. The interest rate is not posted, and you have to dig deep to find out. I think the max loan is $500, and they have to pay the loan off by the next payday (which is why it is transferred directly).

    I, too, worked at a place where you could rent-to-own, and the customers ended up paying 2-3 times the price if they were able to complete the contract (most didn't and my job was to reposses, clean the goods and get them ready to sell again)


    Originally Posted by Aronya
    Somebody needs a $500 loan, so they agree to pay $1500 for it? How far down the road after the initial loan is transacted does this happen? Also, I have a hard time believing anybody can legally charge 300% interest. Another thought; if that $2000 is deducted from the person's account 3 months after the loan was made, they would actually be paying 1200% interest, since interest rates are normally stated based on an annual rate.


    I dunno... I have no argument with the idea that this is an extremely poor financial decision on the customer's part (I used to work for Rent-A-Center; similar concept), but it seems a little over-stated. Is the contract really that extreme?

    Just my 2cts.
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    Collection agencies can be brutal. Reminding me of a scenario involving a phone bill, earthlink, and local toll charges which amounted to a certain $2,000 phone bill for someone we'll call Joe. We come into this conversation here, after the collection agency called Joe's roommate, who we'll call Bob.

    Joe: Who's this
    CA: This is Rose from GonnaGetcha Collection Agency regarding your delinquent debt with Pacific Bell.
    Joe: So why are you calling this number? This is not my number. Bob, who owns this line, does not wish to get anymore calls.
    CA: Sir, we need a way of getting in touch with you.
    Joe: No, you don't.
    CA: We must have a phone number on file.
    Joe: You're calling about what?
    CA: Your debt with Pacific Ball
    Joe: That's the phone company?
    CA: Correct
    Joe: They shut my phone off because I couldn't pay my bill. I have no phone.
    CA: But we need a number on file, is there a neighbor or relative ...
    Joe: No, no one wants to talk to you. Bye. (click)
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    The secret with collection agencies if you 're not planning on paying is to outlast them. Sooner or later the debt will be charged off and they will leave you alone. Of course, if you keep creating new debt you'll be starting the cycle over each time. With a few of these overlapping it can make your life tough. In the case of a debt secured with property there may be attempts at repossession, but it's fairly easy to avoid, especially if you know they're after you. Though they may eventually give up trying to repo a car they may report it stolen.

    Other than that, all you have to worry about is seriously smeared credit. This may not mean much to you now, but it will when you try to buy a house. You may not be able to get financing or it may be at such an astronomical interest rate that you end up paying for the home several times over.
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