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Payday lenders illegally garnished checks

If your wages are being garnished to pay collectors, or you are being harassed by collectors, you may want to consult a Mesa area bankruptcy attorney. There are often ways to put a stop to this, and in certain cases, you might even find out that what is happening to you is even against the law.

A federal court recently found two companies guilty of illegal lending and collection practices that included illegal wage garnishment. The man who controlled both companies was fined almost $300,000.

According to the Federal Trade Commission, the companies had taken money from its clients' paychecks to repay loans the clients had borrowed. These clients had apparently checked a box on their online loan applications that agreed to "wage assignment," which the company said granted it permission to garnish wages if loan payments became delinquent.

However, this practice violated the FTC's Credit Practices Rule which bans such "wage assignment" by private businesses in most cases. Under U.S. law, only federal agencies are allowed to force employers to garnish employees' wages without a court order when the employee owes money to the government. Private companies cannot do this.

The court said that the companies were acting as if they had the same collection rights as the government.

The collection companies also violated the Fair Debt Collection Practices Act when it told employers about their employee's debts without their consent, as well as other offenses.

Those struggling with overwhelming debt may want to consider filing for bankruptcy or seeking debt relief. There are various types of bankruptcy protection filings, but the most common type, Chapter 7, immediately stops creditor harassment, repossession and wage garnishment and offers a fresh financial start. 

Source: Collections & Credit Risk, "Court Fines Payday Lending Defendants," Dec. 21, 2011