The Office of the Attorney General (OAG) became aware in recent months that many payday loans in the District of Columbia require borrowers to make loan and fee payments through automatic debits from their bank accounts. "Direct withdrawals of money from consumers' bank accounts cause hardship for many consumers when the withdrawals come at unexpected times or in unexpected amounts," said Mr. Spagnoletti. "Our law is very specific about the practices that lenders must follow when making payday loans," he added.

District of Columbia law permits deferred deposit transactions, more commonly known as payday loans, but the loan procedures are carefully prescribed by the DC Check Casher's Act. The Act allows these high fee loans only when a borrower presents a check to a lender and enters into an agreement with that lender not to deposit the check for a short period of time, usually two weeks. The payday loan is repaid when the lender deposits the check and it clears.

In an effort to stop abusive practices by payday lenders, OAG has sent approximately 125 letters to District businesses licensed to provide check cashing and payday lending services. The letters notify owners that, under DC law, a payday loan must involve the deferred deposit of a check rather than automatic withdrawals from a consumer's bank account.

Consumers with questions about this action can call the Office of the Attorney General's consumer complaint hotline at 202-442-9828. For consumer education information, and tips on how to make an effective consumer complaint, go to www.oag.dc.gov.