Can Anyone Be Arrested for a Payday Loan Default?

By Jesse Sears

  • Overview

    Payday loans, which usually take the form of postdated personal checks for a quick amount of money at steep interest, sometimes come from sources who commit practices outside the law. Payday loan stores may threaten criminal prosecution and jail to those who don't pay back a payday loan. You will not go to jail for any sort of personal financial debt in the United States. Here's why these threats are boundless.
  • Your Rights

    When taking on a payday loan, you have a right against harassment from the creditor. Harassment means physical actions or threats against your person or property, as well as some more technical things like to what end and how many times the creditor can contact your friends or relatives. Note that phone calls from the creditor are not covered here; like credit card companies, payday loan brokers are free to call you during the hours of 8 a.m. to 9 p.m., or at other times if you have given them permission to do so.
  • Federal Laws

    The Federal Trade Commission has made available a set of laws that fall under the Fair Debt Collection Practices Act, which lays out very clearly the legal standing on threats of arrest for defaulting on payday loans. From the Fair Debt Collection Practices Act, section 807: "The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action." This is not merely wrong, it is against the law, and such threats will hold up in court if you have documentation.

  • If You Are Threatened

    Your first recourse is to cry foul and state your rights. In 90 percent of cases, your knowledge of the law will be enough to stop the creditor from continuing with such boundless threats. If the creditor continues, especially with threats of physical harm, it is the creditor and not you who is acting outside the law. Pay your debt as soon as you are able, but don't worry yourself with the notion of going to jail.
  • Loan Broker's Rights

    It is within the rights of a payday loan creditor to call you, even every day, until your loans have been paid. There are limits to when and in what form these calls can take place; refer to the Fair Debt Collection Practices Act at the link provided for this. Creditors also are within their rights to garnish your wages until the debt is paid off. Remember to use high-interest payday loans only as a last resort.
  • Alternatives

    Finding yourself in a situation where money is an absolute and immediate necessity can be scary. Auto repairs necessary to get to work can be a situation where taking on a high-interest loan is unavoidable for some with poor credit. If a personal loan from a family member or friend is not available, consider pawnshops as an alternative to payday loans. Pawnshops require you to put up an item of value as collateral, taking on a loan with 3 or 4 months for repayment. If you don't repay, the item is forfeited, but the debt is taken care of.
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