I took out a payday loan several months ago. I paid back the amount and full plus an overpayment of $875 when I found out that the loan is illegal in NJ. Can I take the payday lender to small claims court for the overpayment?

You can, if the loan was indeed "illegal" sue them for all money paid over the original amount of the loan.

So if it is illegal, they are not allowed to collect excess interest either

I took out a payday loan several months ago. I paid back the amount and full plus an overpayment of $875 when I found out that the loan is illegal in NJ. Can I take the payday lender to small claims court for the overpayment?

First, how did you determine that the loan was illegal?

Second, how did you calculate that you overpaid by $875? What was the interest rate on the loan and how long was the life of the loan?

After researching online and several legal websites I found out that payday loans are in fact illegal in the state of N.J. The loan company is only allowed to charge 30% annually. I calculated the amount paid and the interest based on the six months and that is how I determined the overpayment of $875.00

After researching online and several legal websites I found out that payday loans are in fact illegal in the state of N.J. The loan company is only allowed to charge 30% annually. I calculated the amount paid and the interest based on the six months and that is how I determined the overpayment of $875.00

I cannot find anything stating the payday loans are illegal in New Jersey; could you give me a link? I'm always interested to learn something new.

Also, how much was the loan originally? How often did you make payments? How much were your payments?

EDITED TO ADD LINK: I did find this:
http://www.affil.org/consumer_rsc/payday.php#states
However, I haven't seen the paperwork you signed when you took the loan.

I find NJ law to be confusing - apparently "payday loans" are also called "cash advance loans" and are legal. I do find the interest cap to be 30% but I don't see how the interest is compounded.

I would advise the OP to file in Small Claims Court and see what happens.

It appears that a consumer protection law contains wording on payday loans, not State law.

As I said - confusing indeed!

I find NJ law to be confusing - apparently "payday loans" are also called "cash advance loans" and are legal. I do find the interest cap to be 30% but I don't see how the interest is compounded.

I would advise the OP to file in Small Claims Court and see what happens.

It appears that a consumer protection law contains wording on payday loans, not State law.

As I said - confusing indeed!

I can't believe I'm about to type this... but I don't fully agree with you :eek:

The OP really hasn't given enough information about their situation. I don't see how, at this point, they have any type of chance of winning in small claims. They haven't stated how much the loan was for, how long it took to repay, etc. And as you pointed out, the "payday loans" can also be "cash loans" which are legal. And honestly, I don't see how this company would have been able to stay in business operating illegally - you'd think the state would have caught on to them by now.

I don't see the OP having any case to file, to be honest. I think without more information, filing at this point would be the equivalent of throwing money in the trash.

I found out that payday loans are in fact illegal in the state of N.J. The loan company is only allowed to charge 30% annually.

This is totally contradictory. If the loans are illegal then it would not be legal to charge interest. So if the loan company is allowed to charge interest, then the loan can't be illegal.

An annual interest rate of 30% may not mean simply 30% of the amount borrowed.

So we need to know the amount of the loan, the amount of time you had it open (from the date you received the money to the date you paid it back) and the total amount you paid. With this info, we can determine if you, in fact, overpaid.

The amount of the loan was $400. I paid them $1395.00.

Here is the citation information regarding payday loans in NJ.

Citation:
Consumer loan act applies but rates as agreed to by contract. N.J. Stat. Ann. Tit. 17, § 1 et seq. However, criminal law sets the usury cap at 30%. N.J. Stat. Ann. § 2C: 21-19. A check cashing licensee cannot cash or advance money on a postdated check. N.J. Stat. Ann. § 17:15A-47.

Small Loan Rate Cap
30% per year

The amount of the loan was $400. I paid them $1395.00.

Here is the citation information regarding payday loans in NJ.

Citation:
Consumer loan act applies but rates as agreed to by contract. N.J. Stat. Ann. tit. 17, § 1 et seq. However, criminal law sets the usury cap at 30%. N.J. Stat. Ann. § 2C: 21-19. A check cashing licensee cannot cash or advance money on a postdated check. N.J. Stat. Ann. § 17:15A-47.

Small Loan Rate Cap
30% per year

But again, you haven't told us how often you made the payments,nhow much the payments were, if the payments were late, how long the loan was for, etc.

You're taking the original loan amount of $400 and figuring 30% on that amount for only one year and trying to say you only owe $520 - that's not how it works. They annual limit is 30%, which equals 2.5% a month. If you extended this loan or made late payments, that could be where the extra fees are coming into play.

The payments were automatically taken out of my checking account every two weeks. If you renew the loan they add on fees. The payments were made over a period of 4 months. They were charging an interest rate of 576.32%

The payments were automatically taken out of my checking account every two weeks. If you renew the loan they add on fees. The payments were made over a period of 4 months. They were charging an interest rate of 576.32%

How much were your payments? Were they ever late?

The payments varied each time and no they were never late since they were automatically debited from my account. They ranged from $90 -$170.

The payments varied each time and no they were never late since they were automatically debited from my account. They ranged from $90 -$170.

That doesn't make sense. Usually they have you sign an agreement saying you'll pay a minimum amount every month, and then a separate agreement that authorizes them to automatically debit your account each month.

How could your payments "range" between an eighty dollar difference?

And yes, they can be late. If the loan office tries to withdraw from your account on say, the 3rd of the month but you don't have enough money until the 5th, then your payment is late.

Can you give us a timeline showing which withdrawals were made and on which dates? What date was the payment due on?

The only way I can see your payments ranging is if your balance ranged. The agreement may have been for a specific percentage each time or that you didn't have enough for the full payment. And if you didn't have enough for the full payment, then late charges and other fees may have inflated the amount.

Also, I don't know where you get the idea that the cite you posted makes payday loans illegal, but I don't see that at all.

Finally, we have asked you for some very specific information so that we can help you. You come back with bits and pieces but not all that we asked for. If you are not going to give us the info we ask for, then I'm just going to close this thread.