Safeguard Your Bank AccountsProtecting Your Checking Account
Check advance loans are possible based on the lender's ability to secure the loans through checks or debits to your bank account. This makes it easy for the lender to collect monies owed, as well as being a convenient payment option for the borrower. It also benefits the lender by increasing the chances that you will renew or extend a cash advance when your bank account balance is too low to repay the money. You should never write a check if you do not have the money in your account to cover it or you risk bouncing the check.
If you do get in trouble with paying back a cash advance, you should talk to your banker immediately before you start incurring overdraft fees. Once you have bounced a check, it can become an escalating cycle of additional cash advance fees and NSF (non-sufficient funds) charges. When a cash advance lender continues to try to collect on a check that you have written, they can add fees, and the bank will charge you an additional fee for every attempt. This cycle can very quickly spiral beyond your control.
It may come to the point that it would be better to close the account and open a new one in order to regain control. You should discuss this option with your banker who can tell you when it is the right time to take this step. Your banker can also help stop payments from being made to lenders who have access to your account.
If your account is closed involuntarily because of too many overdrafts, you can end up blacklisted by the banks, which can result in your inability to open another bank account for up to five years. Remember that while most states do not allow cash advance lenders to file criminal charges when you write them a bad check, some states do allow the lender to take civil action against you.
Stopping Payment On Cash Advance Checks
If you get yourself in a situation as described above, you may be tempted to have your bank put a stop payment order on the check in order to prevent further NSF charges to accrue. Stopping payment on a check for a cash advance does not void the contract that you made with the lender, so you will still owe the balance plus any fees for the cash advance. You should also be aware of the process of stopping payment on a check and what that process entails before making this decision.
You must tell your bank before the cash advance payment comes due in order to request a stop payment order. They will not rescind the order if payment has already been requested. By orally requesting a stop payment order, such as over the telephone, the order is only valid for two weeks. You must follow up with a signed, written notice to the bank within that time in order for it to continue. Information that you must provide to the bank is the exact check number, to whom it was made out to, the date that it was written, and the exact amount of the check.
Banks typically charge a fee from $18 to $32 to issue a stop payment, similar to a bounced check fee. The stop payment order usually will be in effect for a period of six months. After that period, the company that holds the check can again present it for payment. Unless you watch for this and put another stop payment, the bank will process this check. Be sure to watch your bank statements for old checks, as you can have the bank replace the money and send the check back as stale dated once it's over six months old.
Check State Law Before Stopping Payment
Laws vary from state to state in the regulations covering cash advance loans and the checks used as security. Some states allow legal action by the lender if the borrower stops payment on the check used to get the cash advance, or if they close the bank account that the check is written from. It would be wise to check the laws of your state before requesting a stop payment order.
Cash advance lenders in Alabama and Alaska are able to pursue criminal action, if a check is returned due to the borrower closing the bank account. Colorado and Wyoming have state laws that will hold borrowers accountable, if they close a bank account before the cash advance comes due. It is illegal in North Dakota for a borrower to close the account at the time they receive a cash advance.
In Missouri, Hawaii, or Arkansas, borrowers can face criminal prosecution, either by requesting a stop payment order or by having the check bounce, because they closed the bank account as both activities are considered crimes. Mississippi cash advance lenders can initiate criminal action if a cash advance check from a borrower is returned due to non-sufficient funds. A borrower can be sued in Utah for triple damages, if they don't pay a check used for a cash advance, but lenders cannot pursue criminal prosecution.