Can a payday loan company contact my employer?
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UPDATED: Feb 11, 2013
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A payday loan company can contact a borrower’s employer but the company is limited as to the amount of information it can legally reveal.
Since a credit check is not required for payday loans, a lender bases the loan amount on a borrower’s monthly income and current employment status.
Similar to other security checks, such as on renter’s applications, a payday loan lender is allowed to call a borrower’s employer to verify that the job they claim is legitimate and their monthly income is as described on the payday loan application.
But it is up to the payday lender’s discretion and company policy whether or not it will actually contact a borrower’s employer for job verification. If the borrower can provide a current proof of employment and income, it might not be necessary. Borrowers should ask their payday lender if contacting employers is company policy before the payday loan is requested.
Even if a lender does contact an applicant’s employer, the conversation should be short. The amount of contact between a payday lender and a borrower’s employer depends on whether or not the lender is operating legally or illegally. Anything beyond employment and income verification is illegal. Illegal companies will use threatening and deceitful tactics to force borrowers in repaying payday loans.
According to the Fair Debt Collection Practices Act (FDCPA), a debt collector may not harass a person for the collection of debt with the “use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.”
It is a violation of federal law to distribute personal financial information, such as a consumer’s debt, without the consumer’s consent. If a lender contacts a borrower’s employer and notifies them that the employee has not repaid a payday loan, the lender is acting illegally and can face legal action.
After a loan is taken out, the payday lender loses their right to re-contact a borrower’s employer.
Even if a payday loan is left unpaid, the lender is not legally able to contact a borrower’s employer. The case is still of a confidential manner.
But this will not keep an unscrupulous lending company from making empty threats.
Payday lenders can be one of the most aggressive types of creditors since the loan is based on a future check, and not on a form of collateral (such as a car which can be repossessed in auto loan arrangements). Many corrupt companies use these threats to cajole borrowers into repaying their debts. If a lending company reveals this confidential financial information to a borrower’s employer, the borrower is able to take the payday lender to court.
If a borrower has experienced an unlawful payday lender, they should contact the Federal Trade Commission (FTC) and report the company.