In the US, personal loans are governed by the state laws. When someone approaches for the best personal loan, the usual practice is to collect a post dated check of the total repayment amount beforehand from the customer. By doing so the company ensures that it does not have to go after the customer for the payment. If the check bounces due to insufficient balance the company can sue the borrower for the damages.
In California, the law, in this regard, is a little different than in other states. The law states that the company’s claim to damages is limited to the amount of check and a bounce fee of $15 or so. There are no further damages to be claimed or won. This situation is a different from the other states in that the amount of damages in case of check bounce in this business is treble of the amount in other states. So, the lenders can claim not only the check amount but also the extended damages.
But, why is the law the way it is in California? The reasoning behind this is that at the time of availing the best personal loan, the lenders know that the borrower does not have sufficient balance in his/her account. Despite this knowledge, they extend the cheap personal loan wanted by the borrowers. So, later on, when the post-dated check gets bounced, the lenders cannot claim extra damages for the risk they have undertaken willingly and in full knowledge of the facts. However, in case of other loans, the extent of damages to be won could be many times over the default sum.
A California company threatened the borrowers with court action if thrice the sum was not paid in case of bounce of the post dated check. It did not disclose in the court that the nature of loans it has extended to the borrowers are the instant personal loans and was, therefore, able to win damages of three times the sum of the post dated checks. It was discovered later by an attorney who filed a complaint with the court for the intimidation tactics and fraudulent inducement by the company of the courts into making the judgment without full disclosure of material information.
This case shows that the borrowers shall know the law of their state with respect to the best personal loan that they might seek anytime in future.