Are Payday Loans Illegal in New York?

Q: How to get out of payday loans legally?

To get out of payday loans legally, you can negotiate with the lender for a repayment plan or settlement. You may also consider seeking assistance from a credit counseling service. If the loans are illegal in your state, as in New York, you may have grounds to dispute the debt and potentially have it dismissed.

Full question:

I have 3 outstanding payday loans that I cannot pay due to severe medical issues that has me out of work. I was told that online payday loans are illegal. Is this true? If so, would this make the loan null and void. The total of the 3 payday loans is $1050.00.

Category: Debts and Credit
Date: 04/07/2025
State: New York

Answer:

Payday loans are illegal in New York state. A payday loan is a relatively small (usually under $500), high interest, short-term loan. A borrower gives a lender a postdated personal check or authorization for automatic withdrawal from a bank account. In return, the borrower gets cash, minus the lender's fees. The lender holds the check or electronic debit authorization for a week or two (usually until the next payday). At that time, the borrower has the option of (1) paying back the loan and fee in exchange for the original check, (2) letting the lender deposit the check, or (3) renewing or ‘rolling over’ the loan.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Is there a statute of limitations on payday loans?

In New York, the statute of limitations for collecting a debt, including payday loans, is six years. This means that a lender has six years from the date of default to file a lawsuit to collect the debt. After this period, the lender may no longer legally pursue collection through the courts. However, the debt may still exist, and the lender can attempt to collect it through other means.

What happens if someone borrows money and doesn't pay back?

If someone borrows money and fails to pay it back, the lender may pursue collection efforts, which can include contacting the borrower for payment, sending the debt to collections, or filing a lawsuit. In New York, if the debt is not paid, it can negatively impact the borrower's credit score and lead to additional fees or interest on the unpaid amount.

What happens if you never pay a loan back?

If you never pay a loan back, the lender can take various actions, including reporting the debt to credit bureaus, which can harm your credit score. They may also sell the debt to a collection agency or file a lawsuit to recover the amount owed. In New York, this could lead to wage garnishment or bank levies if the lender wins the case.

How to get out of payday loans legally?

What happens if you can't pay back a payday loan?

If you can't pay back a payday loan, the lender may attempt to collect the debt through various means, including contacting you or sending the debt to collections. In New York, since payday loans are illegal, you may have legal grounds to challenge the loan and avoid repayment, but it's advisable to consult a legal professional.

What happens if you borrow money and don't pay it back?

If you borrow money and do not pay it back, the lender may take steps to collect the debt, which can include contacting you, involving a collection agency, or pursuing legal action. In New York, the lender has a limited time frame to sue for the debt, typically six years, after which they may lose the ability to collect through the courts.