Law of the West: Come into my office …
April 14, 2006
by John Scorsine
Welcome. Please, come into my office. Have a seat. Would you like a cup of coffee or a soda? So, how may I help you today? Each day the relationship between an attorney and a client begins much this way. Often times, a few minutes later, the client leaves the office with some newfound knowledge of the law and the welcome reassurance that an attorney is not necessary to resolve a problem that moments ago seemed insurmountable.
The law is a complex and demanding discipline. A lawyer trains in the law every day. Many times the differing outcome of seemingly identical situations hinges a single distinguishing fact. Yet, there is an abundance of law related information available to the untrained. The consequences of being untrained in the law and applying the material found in a library or on a Web can be disastrous. Yet, not every legal matter requires the services of a lawyer.
This bi-monthly column will try to address the issues and questions that you may have about the law. Its focus is to provide general information about those legal issues that arise everyday. More importantly, I will try to indicate those “red flags” which indicate you should see an attorney without delay. The column will also provide you with timely information about changes in the law that may affect the way you work, play and live.
This column really belongs to you the reader. You should feel free to suggest areas of the law or law-related current events that you would like to hear about from a lawyer. Your true name will never appear in the column. But, a warning is necessary. Nothing within this column is meant to be legal advice, as is noted in the “attorneyish” language at the end of each column. If you need an attorney, this column is not a substitute. However, a competent attorney is always just a phone call away. There are a variety of referral services in the region.
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Finally, a little bit about me. The purpose of this column is to educate and inform the public about the law; not to look for new clients. I have been in general practice for 16 years. My practice is limited to those matters that are particularly compelling. On a rare occasion a letter may come to me through this column that is so compelling that I may respond to it personally. This is very unlikely. If you need an attorney, my advice is that you call a Lawyer Referral Service operated by your state or local bar association.
Well, I hope that you will be informed and enlightened about the law through the coming weeks. The law is a marvelous instrument. It is rigid enough to provide us with structure and order for society. Yet, it is flexible enough to be tailored to individual situations and accomplish its goal: justice.
Borrowing Against Your Paycheck
The Christmas season is past. With all the holiday spending many of us find ourselves strapped for cash. Some of us may even find that the pay period stretches longer than our paycheck. Imagine that! As we drive down the road, wondering how to make everything stretch, we see a sign. Though not divinely inspired, some may think it is their rescuer. “PAY DAY LOANS MADE HERE!” My advice to you is to keep driving.
I have never seen a person emerge from their relationship with one of these offices in better financial condition than when they entered. Most often the use of these payday loans, cash advance or check loan companies leaves you deeper in debt. There may be a responsible way to use these services and a circumstance in which they make sense, but I haven’t seen it yet!
The practice, which is regulated in one form or another in Wyoming, Colorado and Nebraska, works like this: a consumer goes into the establishment and writes a check payable on their account for the amount desired plus a fee. The fee is typically $15 to $33 per $100 borrowed. The amount is typically the amount of your next paycheck. The “lender” holds the check for up to a month, though typically to the next payday. Then, the consumer either redeems the check, allows it to be cashed or “refinances” with yet another payday loan.
The borrower only needs proof of employment, a recent pay stub, some identification and a checking account. There are no credit checks or those other “annoying” questions that bankers might ask ” like can you afford to repay the loan on time? You are in and out in minutes, with your money in hand.
Problems start the moment you sign up. The fee is really a finance charge. In Wyoming, the maximum rate is 20 percent per month or $20 per $100 borrowed. If we use the methods by which every other consumer lender discloses interest, the annual interest rates on these loans vary from 300 to 500 percent. The fee is “earned” when the transaction is made. If you borrowed a $1,000 for 30 days, you would owe $1,200 whether you waited the 30 days to repay or paid it the very next day. Most folks that use these services are not going to be able to make ends meet the following pay period, once they pay the finance fee. So, they are encouraged to “refinance,” issue another check and pay another set of fees. And, what happens if you fail to redeem the check or “refinance” and your check is cashed? If the funds in your account are insufficient to cover it, you just wrote a bad check: a criminal offense.
So what can you do? First, avoid using these services at all costs. If your finances are in this much of a pickle, seek the help of your employer or your banker. Your employer might be willing to advance you a portion of your pay. Credit unions, in particular, offer their members signature loans for small amounts over short terms. Another resource is the consumer credit counseling agencies listed in your phone book. They will help you get a handle on the underlying cause of your financial distress.
Your family’s attorney may also be able to help. In 23 states, these companies are regulated as an industry; in 22 states, they must conform their practices to those of small loan companies. In those states, these transactions are typically disguised as something else. A variety of federal and state laws protect you in consumer credit transactions. They include Truth in Lending, your state’s Unfair and Deceptive Trade Practice Act, usury laws and ” in extreme instances ” even the Racketeer Influenced and Corrupt Organizations Act (RICO). Your attorney may be able to assist you in getting off the payday loan treadmill.
The information provided in this column is based upon general principles of law and should not be relied upon in any manner. It is not the intent of this column, its author, publisher or the Fence Post to provide legal advice to any person. You should address specific legal questions to your family lawyer. In Wyoming, the State Bar can refer you to competent lawyers in your community by calling (307) 634-7823. In Colorado, call the Metropolitan Lawyer Referral Service at (303) 831-8000. Readers in Nebraska can receive referrals from the State Bar Association by calling 1-800-742. 3005.