But if you do receive a summons to appear in court, make sure to be there.Does Xact Loan charge an origination fee? Though a payday lender can take you to court, they should not be threatening you with jail time. The Bottom Lineĭefaulting on your payday loan is a crime, but it’s a civil crime - not a criminal one. So if you have proof that a lender violated one of the many federal laws governing short term lending, flip the script and take THEM to court, and perhaps you can get your loan forgiven. The Federal Trade Commission (FTC) offers many protections through the Fair Debt Collections Practices Act. It’s actually pretty common for payday lenders to bend or break the law when collecting debts.
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The payday industry is full of liars, cheaters and scammers. The only court in which they have any legal authority is on the Indian reservation. Therefore, they cannot take you to a U.S. They operate on sovereign Native American land and skate past state regulations.
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About 99% of the time, they do not have a license with the states. Tribal loans are payday loans offered by lenders who are headquartered on Indian reservations. Unlicensed Tribal Lenders Cannot Take You to Court So don’t believe the collectors when they tell you you’re going to jail. In the United States, you cannot go to jail for not paying back a payday loan.įailure to pay back a loan is not fraud, and it is not a criminal offense.
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So even if they are threatening jail time, the law is clear. Unfortunately, that’s the way things are. No, You Can’t Go to Jail for Not Paying Payday Loansĭebt collection agencies will say whatever they want to scare and intimidate you. CFPBĪsset seizure is not a likely outcome unless you declare Chapter 7 bankruptcy. For example, under federal law certain benefits or payments are generally exempt from garnishment. Each state will have different procedures, as well as exemptions from garnishment, that apply to both the wage and bank garnishment process. The bank or credit union then holds an amount for the payday lender or collector as allowed by your state law. Bank garnishment occurs when your bank or credit union is served with a garnishment order. Wage garnishment happens when your employer holds back a legally required portion of your wages for your debts.
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The Consumer Financial Protection Bureau defines wage garnishment as the following: If you’re in default on a loan and the lender wins in court, the most likely outcome is wage garnishment.
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If you do appear, you’ll have a chance to make your case, and you might be able to reach an agreement. You may even have to miss work and lose a day’s wages.īut if you don’t show, the judge will be forced to rule in favor of the payday lender. Yes, it’s scary and the last thing you want to do is go to court. If you are served with a court order regarding a defaulted loan, you must show up.
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Most Lenders Are Hoping You Don’t Show Up In fact, if you’re served with a court order, they’re banking on you being a no-show. Going to court is inconvenient and expensive, and usually costs more in legal fees than the loan they will recover. Most of the time, a lender would rather negotiate with you personally and help you with a payment plan instead of going to court. In short, payday lenders cannot put you in jail.Īnd just because a payday lender can sue you doesn’t mean that they will. Failure to repay debt is not a criminal offense - it’s a dispute between you and your lender. court can only order jail time for criminal offenses. What’s the difference? A criminal case involves a crime against the state, while a civil case is basically a dispute between private parties. Note: payday lenders can only take you to civil court - not a criminal court. In order for them to take you to court, you must be delinquent on your payments and in violation of your loan agreement. Short answer is yes, a payday loan company can sue you in court if you default on your debt.