Payday loan companies can freeze a customer’s bank account through a levy order. A levy order is a court granted document which gives an entity permission to essentially “freeze” the bank account of a defendant who lost a judgment after being sued in a court of law. Some levies allow the entity using it to freeze an amount equal to twice the amount sought. In other words, a payday loan company can sue a delinquent borrower, win a judgment for $1,500 and place a levy on the delinquent borrower’s bank account for $3,000.
How a Payday Loan Company Freezes a Bank Account
A payday loan company can freeze or place a levy on a customer’s bank account by following a simple process. In the event a borrower’s loan goes unpaid for more than three months, the lender may choose to collect by filing a civil or small claims lawsuit against the borrower. The borrower generally has twenty days to respond to the lawsuit. If the borrower does not respond or his or her answer is found insufficient, the court can award a judgment in favor of the payday loan company for the principal, interest, any fees, attorney’s fees and court costs.
Once the payday loan company has a judgment against the borrower, it can seek a wage garnishment, place a lien against personal property, or request a bank levy from the court. After getting a bank levy, the payday loan company will forward a copy of the order to the delinquent borrower’s banking institution. The bank will freeze the borrower’s account until the debt is paid in-full.
How to Stop a Bank Levy
The most effective way to stop a bank levy from a payday loan company is to not let it get that far. Request to be put on a payment plan or pay off your debt in one lump sum using a cashier’s check or money order. If you can’t reach an agreement, then seek professional help through a payday loan consolidation company. Being on a payday loan consolidation plan means the company will deal with your lender(s). It also means making small monthly payments to become debt free.