This is probably one of the more frequently asked questions I’ve heard. To be more specific, the question I’m most often asked is… Can I be arrested for defaulting on a payday loan? Well, honestly it’s happened before - although it shouldn’t.
Unfortunately some unscrupulous payday lenders have threatened to have people that can’t pay arrested for bad check fraud, although this can’t happen in any state to my knowledge. In fact, it’s against federal law to threaten to arrest people for defaulting on a loan. The FDCPA (Fair Debt Collections Practices Act) is very specific as to what debt collectors cannot do, and this is a big no-no. If a payday loan company, or any loan company for that matter, threatens criminal charges for defaulting on a loan your first response should be contacting your state’s Attorney General’s office.
Payday lenders of this sort prey on your shame and the general knowledge that writing bad checks do, in fact, get people arrested if they don’t pay for them. In those cases, writing a bad check at Wal-Mart or at a gas station for goods or services - and then not paying them - is no different than stealing them. Fortunately for debtors of loan companies, writing a check for payment or a payday loan is not theft of goods or services thus the only recourse is civil action.
So, in summary, you cannot be arrested for defaulting on a payday loan. You can, however, be sued in civil court and in some states be charged double damages and/or have wages garnished. It can become quite a nasty process, so please be careful and don’t ever borrow money you can’t payback.