Have you defaulted on a PayDay loan?
There are many hardships in life and be strapped for cash can be one of them. PayDay lenders typically charge large service fees (or interest) to account for a very high default rate on the loans they make. So, they expect to have some of their borrowers not repay their loans. For a payday lender, these loan are in such low dollar amount (typically less than $1000) and the service fees are so high that if a borrower rolled or extended their loan balance 5 to 6 times, the initial balance will already be paid in service fees.
Can I get arrested for a default on a PayDay loan?
The Quick Answer is NO.
Can I get arrested for payday loan default?
Collection methods for payday (or cash advance) loans can be aggressive and invasive for the borrower. A default on a payday loan involves a post-dated worthless check, and some state credit laws allow up to triple damages when a bounced check/bad check/NSF check is used in a retail transaction. Payday lenders also may require customers to sign an “Assignment of Salary and Wages” allowing them to go directly to the borrower’s employer to ask for the amount owed to be deducted from the borrower’s paycheck and paid directly to the payday lender.
If a borrower defaults on his/her payday loan, the lender can take the same action as any other unsecured creditor to enforce a defaulted debt. They are in the same league as Credit Card companies and Mortgage Lenders. They begin their collection efforts with telephone calls and multiple letters demanding that you pay the balance of the loan and any added interest (late fees and/or service charges). You can usually eliminate the phone calls by sending a “Cease Communication Demand Letter“, commonly called a cease and desist notice, to the collection agency (if the payday loan company refers your accounts to one). A federal law called the Fair Debt Collections Practices Act (FDCPA) states that third party collection agencies must halt contacting you if you notify them to stop in writing. California and Texas (and serveral others) extend many of the laws and regulations in the FDCPA to cover the original lenders (or creditors) as well.
If you’re in PayDay Default, you may have some hope!
You may be in luck if you live in the 8 states whose payday loan regulations require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers or extensions allowed by law and the lender determines that they are unable to pay the balance of the loan.
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