Payday loans come with exorbitant interest rates and fees that often make it very difficult to repay them. If you can't repay a payday loan, the account may be sent to a collection agency, damaging your credit. Default on a payday loan can result in bank overdraft fees, collection calls, damage to your credit score, a day in court, and a garnishment of your paycheck. No, you can't be arrested for not paying a payday loan.
However, if you are sued or a court judgment was entered against you and you ignore a court order to appear, a judge can issue an arrest warrant against you. Even California payday loans, which are heavily regulated, can keep you struggling to go into debt indefinitely. If you've tried and haven't been able to get a loan from your bank or credit union, you still have better options than California payday loans. You can apply for a small loan from family and friends.
Talk to your employer about an advance. Default on any loan will cause your credit rating to be affected and carries the risk of legal action. If the payday loan company sells an account to a collection agent, the borrower is now obliged to repay the balance to the collection agent. While some states have outlawed payday loans, California still allows a regulated form of this practice.
Interest charges for an overdue balance on California payday loans are capped at 15%, but initial charges can be equivalent to a rate of nearly 500%. And fraudulent payday lenders often use temporary websites and route transactions through intermediaries, making it very difficult to find the culprit. In addition, many state laws require payday lenders to offer extended repayment plans (EPP) that allow you to repay your loan for a longer period of time. Even if you can get a loan in the future, you could face much higher interest rates (although not as high as payday loan rates).
For that reason, some argue that banks are pushing consumers to get payday loans by denying small loans to borrowers with bad credit. If you need to apply for a payday loan, do it only for emergency expenses and make sure you can repay it without applying for another loan. Consolidating your payday loans means you'll need to talk to your current lender to come up with a lower monthly payment plan. It may sound good, but those lenders may ignore the law on interest rates, loan amounts and fees, taking advantage of consumers who are not familiar with their rights under California law.
If the payday lender (or collection agency, for that matter) cannot convince you to pay using standard collection tactics, such as phone calls and letters, the payday lender may decide to file a lawsuit against you to get a judgment on the balance of the debt. Although a payday lender would rather take the money out of you directly, you can and will turn to third-party collection agencies, often very quickly, sometimes within 30 days of the missed payment deadline. A felony is traditionally considered a high-gravity crime, and failing to pay your payday loan is not a felony. They will immediately withdraw the money from your bank account if you have given them access as part of the loan agreement.
Follow the State Information link for specific regulations for payday lenders in California. .
