Payday Loans and Wage Garnishees. What You Need To Know.

Posted in Debt Help
Posted by Ted Michalos, BA, CPA - LIT

voluntary-garnishment-payday-loan-post

Recently I have seen advertising that attempts to scare people into filing bankruptcy or a consumer proposal to stop a payday loan wage garnishee.  The approach is something like this;

Payday lenders often don’t take people to Court when they don’t pay – they simply garnishee your wages based on a voluntary form you signed allowing them to do so when you borrowed the money.

I have a couple of problems with this form of advertising in that it is misleading. It deliberately misuses the term garnishee and it doesn’t provide you with a complete explanation of your rights.

Let’s start with the term garnishee.  A garnishee, or wage garnishment, is a legally required and authorized deduction from your pay based on an Order issued by a Court.  

If someone takes you to Court and obtains a Judgment against you (an Order for you to pay a certain amount of money) they have the right to apply for a Writ of Execution (also called a Writ of Seizure).  This Writ is registered with the local Sheriff’s Office and allows the creditor to freeze and seize your bank account, as well as garnishee your wages.  If your employer receives a Notice of Garnishee they are legally required to make deductions from your pay.  If they do not then your employer becomes liable for the debt.

By definition, if you agreed to a voluntary payroll deduction to deal with a debt it is not a garnishee.  By referring to your payment arrangement as a garnishee the ad is implying it is a legally enforceable deduction from your pay and that you have no options and that is incorrect.

What Are Your Rights In A Payday Loan Garnishment?

Payday loan lenders do often include language where you 'voluntarily' agree to allow them to take payroll deductions in the event you do not pay. However this is NOT the same as a legal garnishment and here's why:

If you signed a voluntary agreement to allow payroll deductions you have the right at any time to revoke your permission.  Further, you employer is not required to make the deductions (even if you want them too) if they don’t want to.

Get Real, Honest Debt Help

Now, if you have a problem with payday loans you may very well need to speak with someone regarding your money problems.  I just think you’ll be better off speaking with someone that explains your rights, as opposed to scaring you into doing something you may not need to do.

I recommend you watch our slideshare to learn more about payday loan debt relief options and your rights in the event you do take out a payday loan and find yourself in financial trouble.

Filing bankruptcy or a consumer proposal does eliminate payday loans. I don't disagree with that. And it does stop legal wage garnishments. It is the misleading nature of the advertising that bothers me.

If you do have a problem with debt that leads you to frequent and multiple use of payday loans then it is important to speak to a professional bankruptcy trustee. Make sure however that professional is reputable, licensed and honest about what is right for you.

payday loan and garnishment help

About Ted Michalos

Ted is our co-founder and is a Chartered Professional Accountant, certified Insolvency Counsellor, Licensed Insolvency Trustee, Consumer Proposal Administrator, and the President of Hoyes, Michalos & Associates Inc. Ted meets personally with clients in our Guelph office.

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