Payday Loan Modifications Can Be a Dangerous Trap
Payday loan lenders are infamous for their crafty schemes aimed at deceiving borrowers. In this light, we are diving into an incisive look at the payday loan modification trap that has raised eyebrows recently.
The Ploy Unveiled
One of the most recent cases that came into spotlight involved a payday lender named XYZ. The lender, reportedly sent an email to a consumer proposal client, offering a “Loan Modification” agreement which proposed an altered payment schedule by deferring payments.
The email contained an authentic-looking document outlining the new payment schedule. While the document seemed legitimate, a closer look revealed a different story.
The Catch
The borrower in question was already part of a consumer proposal, implying that the loan from XYZ had been included in their filing. Therefore, it was not required to be managed separately from the proposal. Despite this, the lender sent the agreement offering a deferred payment date that was clearly outdated.
The Power of a Consumer Proposal
Among the numerous benefits of filing a consumer proposal is its binding nature on the debtor and all their creditors. With few exceptions, no unsecured creditor can be excluded from the insolvency process, ensuring fairness to all parties involved.
The Confusion
The communication from XYZ caused widespread confusion and distress among their clients. This was not an isolated case, with several other clients who had previously borrowed from XYZ reporting similar occurrences.
Note: Clients are strongly advised to disregard such loan modification emails from payday lenders, especially if the lender was notified of their consumer proposal or bankruptcy.
The Question of Ignorance
Can the lender plead ignorance? It’s possible that XYZ was not aware of the client’s proposal status. Or, perhaps they did not thoroughly scan their email list to exclude those who did not owe them. Either way, their actions have resulted in significant distress for their clients.
The Terms of the Loan Modification Agreement
The loan modification agreement included certain terms which, while not surprising, are worth highlighting.
Typically, lenders charge interest on the loan principal during a deferment period. But there was something more concerning about this agreement.
The recipients of this loan modification had not provided their consent to it. This agreement was sent unsolicited in a general email blast, revealing the predatory nature of payday lenders.
The Predatory Nature of Payday Lenders
Payday lenders profit from borrowers deferring debt payments. Given the financial hardship their clients are likely facing, deferrals are expected. With less of the loan principal paid down and high interest accruing, payday lenders, like XYZ, stand to make a considerable profit at the expense of their borrowers.
What’s interesting is the transparency of payday lenders. They don’t hide the higher cost of deferrals from their clients. In fact, they state it clearly in their terms. However, they bank on the likelihood that most borrowers won’t question the offer and will not contact them during the 10-day query period.
The Lure of Good Customer Service
Payday lenders often tempt individuals with good customer service. The offer of a deferral, especially in desperate times, can be enough to lure borrowers into their trap. This makes the repayment process more challenging and perpetuates the cycle of debt.
Break Free from the Debt Cycle
If you’re struggling with payday loan debt, remember that you don’t have to keep borrowing to stay afloat. There are ways to break free from the debt cycle. Consider speaking to a Licensed Insolvency Trustee near you to explore options for true debt relief and a fresh financial start.
In conclusion, while payday lenders may seem like a quick solution, it’s important to delve deeper and understand the traps they lay. Be informed, be vigilant, and beware the payday loan modification trap.
