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What to do when illegal payday loan lenders trap you

Many a times, people take out payday loans without having any idea about the state rules and regulations. If you're one of them, then check out the payday loan laws in your state as soon as possible. Once you check out the laws, you'll come to know that all the lenders are not legal in your state.

Take for instance, you've obtained payday loans from the companies like VIP Loan Shop, White Hills Cash, Blue Thread Lending and Zip 19. None of these lenders are legal in this state. As such, you've to payback the principal amount only. In addition to that, you'll have to take a couple of other steps as well. Read along to know about them.

3 Steps you need to take to get out of the debt trap

Here are the 3 steps you can take when you wish to get out of payday loan debt trap.

Have a talk with the banker: Discuss with the bank relationship manager about the steps to close the bank account. Now, you may face some problems in closing the bank account under the following circumstances:

  1. Your paycheck is directly deposited into your bank account
  2. The bank does not want to close the bank account

In these cases, you may request the bank to put the account into deposit only status. Just inform the banker that your account has been compromised and you wish to revoke the ACH authorization. There is no need to tell about the payday loans in details. All you need to inform is that the lenders are withdrawing more than they ought to.

Ask your employer to issues paper check till you're able to move it to a new account. Even if you don't close the old account, make sure there is no link between these 2 accounts.

2. Pay back the principal amount: As per the state and federal laws, you're not legally obligated to pay interests and fees to the illegal lenders. You just need to pay back the principal amount to the lenders. Send the original amount to the lender and inform him that you won't make further payments.

Send a mail or a letter to the lender as soon as possible. Inform him that you've discovered the fact that the loan is not legal in your state for the following reasons:

  1. The lender doesn't have any license in the state
  2. The lender is not following the state laws
  3. Payday loan business is prohibited in your state
  4. The lender is charging a very high interest rate

3.Have patience and work with the bank: You may have some troubles with your bank. Have patience and cooperate with the bank managers. You may face some problems initially. Try to solve them before you receive your next paycheck.

Finally, calculate the exact figure you've paid till date. If you've paid more than the original amount, then ask lenders to give you a refund. You can get the contact details of lenders from their official websites. Send a mail to these lenders and ask for a refund.


Don't just sit back at home after closing the bank account. Find out the status of your old account on your bank's website. This will help you know if the bank account has been closed permanently.

VIP Loan Shop, White Hills Cash, Blue Thread Lendi...
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VIP Loan Shop, White Hills Cash, Blue Thread Lending, and Zip19. Also, I live in Arizona. I really appreciate any help you can give me.

Follow the link in my signature below on how to deal with unlicensed illegal lenders step by step by OhioGal. How much did you borrow and how much have you already paid - you are only morally obligated to pay back principal.. Are these the only ones you have? 

Sub: #1 posted on Tue, 01/08/2013 - 19:16

HelpinAZ HelpinAZ
(Posts: 1873 | Credits: 288.12)

Glad to help - keep us posted! As for the DD issue see if they can shut down your DD and issue a paper check until can get rerouted to new account.. Or have your bank restrict your current account for deposit only - due to it being compromised and you are revoking your ACH  authorizations. They should be able to put on deposit only status until the DD clears and then just move it to the new account for you - Make sure the new account is not linked in any way.. You don't have to tell them that you have payday  loans - just that you had authorized ACH and that they are taking more than owed and you are needing to revoke ACH and you wish to have account put on compromised resticed hard lock allowing deposit only and that you wish to open a new one not linked to old.. simple.. I bank with Chase and had no problems.. 

Sub: #2 posted on Tue, 01/08/2013 - 23:53

HelpinAZ HelpinAZ
(Posts: 1873 | Credits: 288.12)

Your detailed response is extremely helpful, thank you so much! Tomorrow, I will go to Bank of America and do exactly as you said. After that, I will follow the steps by OhioGal. I'll report back with updates. Thanks again!

Sub: #3 posted on Wed, 01/09/2013 - 04:46

cornfed cornfed

(Posts: 11 | Credits: 1.44)

Keep us posted on how it goes with the bank this morning. and it doesn't matter what you signed as a contract - you still have every right under federal law to revoke ACH authorizations.. Banks can not tell you how to pay your bills! 

Sub: #4 posted on Thu, 01/10/2013 - 17:46

HelpinAZ HelpinAZ
(Posts: 1873 | Credits: 288.12)

Well I just left Bank of America. The person I spoke with was not helpful at all. He talked like he'd never heard of revoking ACH and that it wasn't possible. He kept talking about doing stop payments even though I said that is not what I want to do, I want to stop ACH. Would it be worth it to go to another branch or can this been done over the phone with BofA's customer support? It was frustrating, when I said I wanted to do what you advised me to, he acted like those possibilities don't exist. 

Sub: #5 posted on Thu, 01/10/2013 - 03:02

cornfed cornfed

(Posts: 11 | Credits: 1.44)

speak to a manager tellers as they have no clue whatsoever.

Sub: #6 posted on Thu, 01/10/2013 - 03:06

paulmergel paulmergel
Moderators Cum Industry Expert
(Posts: 15511 | Credits: 1357.03)

The bank said it would take 24 hours, or one business day, for the changes to take effect, that's why they went through.

Sub: #7 posted on Thu, 01/17/2013 - 09:06

cornfed cornfed

(Posts: 11 | Credits: 1.44)

Wow that's almost what I said to the guy, word for word. I said my account was compromised, I want to revoke ACH authorization, and make my current account deposit only until my direct deposit can be changed over to a new account. I'm going back to the bank tomorrow morning when the doors open to speak with the manager. Also, this guy said that it doesn't matter that these companies are not licensed to lend in Arizona because I signed a contract. Now I understand why you stress the fact that it has to be a manager, and only a manager, that you speak with. Now I'm really considering switching to another bank. I already have been frustrated with them and their ridiculous fees that they refuse to budge on.Thank you for your continued help and advice.

Sub: #8 posted on Thu, 01/10/2013 - 05:40

cornfed cornfed

(Posts: 11 | Credits: 1.44)

Today's trip to the bank went much better, the way out should have gone yesterday. The woman I spoke with asked just a few questions and had it taken care of with a couple mouse clicks. She also made my account deposit only until I get my direct deposit changed. Now I can send the companies the emails I have written.Thanks again everyone for your help and support, I'll post again when I have more to report. 

Sub: #9 posted on Fri, 01/11/2013 - 03:56

cornfed cornfed

(Posts: 11 | Credits: 1.44)

I just noticed a typo in that last post, it should have said *it instead of *out in the first sentence. Auto correct on these phones can be a real pain sometimes. 

Sub: #10 posted on Fri, 01/11/2013 - 04:00

cornfed cornfed

(Posts: 11 | Credits: 1.44)

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