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« Legal Consequences of Payday Loan Default
If I close my account after writing a draft to a payday loan company, will I face tough legal punishment? »

  December 29th, 2008
Information on Payday Loan Default

Sometimes people who are somewhat short of money at the end of the month take out a small loan to get them through to payday. This loan, called a payday loan, is taken out with the promise that the loan plus substantial interest will be paid back as of payday. In order to facilitate this, the borrower writes a personal check to cover both the amount of the loan plus the amount of the fee (interest).

An anxiety many borrowers have about payday loans is this: they wonder, “can I get arrested from default on payday loan? The lender may have even warned you that it was a distinct possibility. Because a check is involved, they may have implied that you could be arrested for check fraud if you default on a payday loan. The good news is that this cannot, and will not, happen. The mere fact of there being a check involved doesn’t mean you’ll be arrested for check fraud because of payday loan default.

The bottom line is that you cannot be arrested for default on payday loans. Here’s why: the lender agreed, when they entered into a contract with you in regard to the payday loan, that you did not have any cash in the bank at the time loan was taken out and agreed upon. Therefore, you cannot possibly be accused of check fraud, as you have not claimed you had the money to cover the check you wrote.

Clearly, the answer to the question “can I get arrested from default on a payday loan?” is no, you can’t. It gets better: If they claim you can be arrested, the lender may actually be breaking the law. The lender could be fined and may be forced to forgive your loan. They might actually get themselves, no you, arrested! These laws vary from state to state, but most states have laws in the books to protect you from overzealous creditors.

If you’re wondering what law specifically answers the question of “can I get arrested from default on payday loans” it is the Fair Debt Collections Practices Act (FDCPA). According to this statute, it is illegal for a payday loan company (or anyone else, including collection agencies and lawyers) to threaten a debtor with the possibility of arrest for non-payment of a debt.
Just because they can’t have you arrested, though, doesn’t mean they can’t threaten you with legal action. They can do some things to you, however. If you default on payday loans, you may find yourself in a posit6ion to have your wages garnished or other equally dire consequences. It could be as much as 25 percent of your paycheck until the loan is paid off in full.

If you are in danger of defaulting on your payday loan, and you know you can’t pay it in full when it comes due, try negotiating with your creditor. It is in both their best interest and your best interest to negotiate a settlement that might not be the full amount of what you promised to pay them, but will be equitable for all concerned.

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This entry was posted on Monday, December 29th, 2008 at 10:37 pm and is filed under payday loan default. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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