Independent lenders, who deal in such services as payday loans, title loans, and installment loans, have been known to use some aggressive collection practices on those clients who fall behind on payments. Sometimes, they even threaten legal action, including calling the police, to report delinquent payment.
Which leads to todays question – Can you actually be arrested or go to jail for defaulting on a payday loan?
The short answer is No. Missing a payment, bouncing a payment check, or defaulting on the loan does not constitute a criminal act. Any statement leading you to believe you will be imprisoned or arrested for non-payment is simply a scare tactic. Some unscrupulous lenders want to terrify you into making a payment! But they have no legal recourse for sending you to jail.
That doesn’t mean they can’t pursue you legally! They can go after you in a court of law to remand payment. But they cannot send the police to your door. If they tell you otherwise, know that it is an empty threat.
Can Be Arrested ONLY for Criminal Liability
The one exception to this rule is if the funds were acquired through criminal means. Hackers who steal the personal information of other people and use that information to fraudulently obtain a loan CAN and WILL be held responsible for the money they stole. Criminal liability is appropriate because they willfully stole and defrauded.
But that is NOT the same as bouncing a check or missing a payment. There is a world of difference between these things.
Dismissal of Debts
What the payday lender can do is pursue you in court. They will be forced to act within the constraints of the local and state laws regarding lending. These debts can be discharged by declaring bankruptcy.
Debts for payday loans can get out of hand. Since they use interest rates based on your pay period instead of a yearly calendar, a loan with a rates of 20% could actually end up being 300% or more over the course of a year.
So whatever you do, don’t let payday loans get the better of you! But if they do, you still don’t have to worry about dealing with the police.