Payday and personal-loan products often violate state usury caps or fall short of federal disclosure law. We force the lender to validate the debt, raise the legal defects, and resolve the matter by settlement, court defense, or invalidation.
"Three payday loans, all rolled over a dozen times, three different lenders calling daily. Within a month of engaging Credo, two of the three had backed off entirely. The third settled."
Payday and short-term personal-loan products are designed around recurring fees and rollovers. A two-week loan becomes a six-month obligation. A $400 advance becomes a $1,200 demand. The interest rates, when stated as APR, frequently exceed 300% or 400%.
Many of these products run afoul of the law. Most states impose usury caps that prohibit interest above a certain rate; some states cap payday products specifically. TILA requires the lender to disclose the actual cost of the loan in a specific format. Where those disclosures are wrong or missing, §1640 makes the lender liable.
And many of the more aggressive online operators run on jurisdictional fictions: claiming tribal sovereignty, foreign domicile, or licensing in your state when they aren't actually licensed there. Those claims don't survive an actual challenge.
Validation under §1692g first. Payday lenders' assignment chains, like card-debt buyers', are often incomplete, especially after a loan has been resold to a collection agency.
From there, the substantive analysis. Does the loan exceed your state's usury cap? Were the TILA disclosures correct? Is the lender even licensed to lend in your state? Many tribal lenders and online operators run on jurisdictional fictions that don't survive an actual challenge from a law firm.
Where the legal defects are real, we negotiate from a position of strength. Where the lender insists on litigation, we defend, and the same defects become affirmative defenses to the lawsuit.
The most common path: the lender backs off when it becomes clear the loan can't be enforced. Either because validation fails, because the legal defects are unanswerable, or because the cost of litigating outstrips what they could collect.
Less commonly: a negotiated settlement at the legally enforceable balance, which may be far less than what's demanded. Least commonly: court defense, ending in dismissal, judgment for the borrower, or settlement on the courthouse steps. Where TILA violations are clear, those become counterclaims that materially shift the negotiating leverage.
Cease, validate, analyze, resolve. The timeline runs days to months.
Pull the loan agreement, payment history, jurisdiction details, any ACH authorizations.
§1692g validation demand, state usury check, TILA disclosure check, licensing check.
Settlement at the enforceable balance, withdrawal when defects are clear, or court defense if the lender sues.
FCRA disputes if reported, ACH revocation if applicable, refund claims where TILA damages support them.
Personal- and payday-loan defense leans heavily on TILA disclosure analysis and on state usury law, with the FDCPA controlling collector behavior.
Required disclosures of APR, finance charge, and total cost (§1638). Lender liability under §1640 when disclosures are wrong or missing, central to payday-loan defense.
Read moreApplies once the loan goes to collection. Cease letters, validation demands, and damages claims under §1692k all live here.
Read more§1693e gives you the right to revoke a recurring ACH authorization in writing. That's the lever for stopping unauthorized debits from your bank account.
Read moreNames changed, amounts approximate.
Five payday loans across three lenders. The validation letters went out the day I signed up. Two lenders never responded. One produced a contract that didn't match the balance. The fourth settled for the principal only.
The TILA disclosures didn't add up. The APR they printed was different from the math when you ran the numbers. The lender's lawyer agreed to a settlement at less than what I'd already paid in fees, plus a refund.
The lender claimed tribal sovereignty. They weren't licensed in my state. The loan was unenforceable from day one. The collection agency backed off the moment we pointed it out in writing.
Payday lenders count on borrowers having no realistic alternative. The three real options aren't actually equivalent.