by Ben Sweiry ·
Modified on 14 September, 2022
Yes, if you are unable to repay a payday loan, you can be sued. This is not going to be the first option by the lender who will typically follow up with a phone call and email and usually use court action as a last resort because of the costs involved. But if all other options to get in touch with you fail to secure repayment, they may use suing or legal action as a way to recover their losses.
However, before taking you to court, payday lenders should be able to prove that they have tried to settle your debt with you in an alternative way.
Payday lenders must follow strict regulations, meaning that they can only contact you as a borrower at specific hours in order to collect the funds they are owed.
Key Points:
- In the US, you can be taken to court and sued for not repaying a loan.
- You cannot, however, go to jail for not repaying your loans.
- It normally takes borrowers around 5 months to repay loans.
- Loan repayments are usually coupled with around $520 in finance charges per $375 borrowed.
- Taking a borrower to court is a last resort for a lender. Before this, you should try to arrange an alternative payment plan.
Can I Get Sued by a Payday Lender?
If you have not paid your lender back for a payday loan that you have taken out, you can be taken to court and sued by the lender.
If the lenders win the court case, you will be required to repay the amount that the court states.
However, before you start to panic, it is important to note that lenders will often work with you first to attempt to secure the money they are owed in a way that best suits both parties. If no resolution can be found, they can take you to court.
Taking a client to court would be the lender’s last resort, as it is costly and not always beneficial for the lender.
What Happens if I Don’t Repay my Payday Loan?
If you find yourself in a situation where you haven’t been repaying your loans and thus are indebted to your lender, this can drain your bank account, trigger wage garnishment, collection calls and lawsuits. Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan.
However, please remember that if you do you have outstanding debt to an online payday lender, but need to pay for essentials such as rent or food, these must come first.
This will likely be an incredibly stressful situation, so it is advisable to consult a nonprofit credit counsellor, legal aid centre, or bankruptcy attorney for advice about where to go from here. You could claim bankruptcy if you are unable to repay your loans, but this should be discussed with a professional as it is only appropriate in certain situations.
As soon as you realise you may struggle to repay a loan, you should get in touch with your lender. You may be able to work out a repayment schedule that works for both parties, as the lender will always try to make it possible for you to repay a loan rather than take you to court.
Can A Lender Withdraw Money From My Account Automatically?
If you aren’t repaying your loan, the payment lender can and likely will set up automatic withdrawals from your account, attempting to regain as much for their loan as possible. This can result in bank fees for you.
If this is unsuccessful, your lender may set up wage garnishment, which involves a part of your paycheck being withheld, and going directly to the lender to repay your loan.
What If I Am Taken To Court By A Lender?
Remember, taking a customer to court over unpaid debt will always be a last resort for a lender, as it will incur legal fees and there isn’t a guarantee that it will pay-off for them.
But, if you are taken to court by your payday lender, there will be an agreement reached for you to make the repayments with a new schedule. Wage garnishment is the process whereby your employer will hold an amount of your income on a monthly basis in order to repay any debts.
In addition to this, it is possible that you will have assets seized as a form of payment for any money you still owe, however this is unlikely. You cannot be imprisoned for failing to make repayments on a payday loan. This is because failing to repay a loan is not seen as a criminal offence.
If you are unable to repay your loan, you can file for bankruptcy before being taken to court, however this should also be a last resort.
Can I Sue a Payday Lender?
Lender liability laws state that all lenders must treat their borrowers fairly, and when they don’t, they could be taken to court under a variety of legal claims.
In addition, predatory lending is an illegal practice which involves unethical and exploitative action by lenders to take advantage of their borrowers and can also be prosecuted across the US.