Payday loans suing me

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This week, three people asked me: "I took out a payday loan and I can't pay it back. Will the cops arrest me? Can I go to jail?"

At first I thought it was just a coincidence, since people are always asking me crazy stuff.

Then I found out what was going on. A couple of the payday loan places in the city switched to a new scummy collection agency. These bottom-feeders threaten people all around the country, it just hadn't happened here lately. Maybe you've got the call too. "If you don't pay by closing time today, we'll send the police to have you arrested tomorrow."

Nobody wants to get a call like that. But you think, "Wait a minute. They can't arrest people for not paying a loan. Sue them, yes. But nobody goes to jail for being overdue on a credit card or a mortgage."

Here's what they tell you: "This is different. You wrote a bad check" (if you gave a post-dated check). Or, "You committed bank fraud" (if you authorized a transfer from an account that had insufficient funds).

And yes, you may know somebodywho's actually been arrested for that.

"Geez," you think, "This is bad."

But it's not. Heck, they might even be the ones breaking the law.

I'm not a lawyer (thank god), but this is how I understand it. To find you guilty of writing a bad check, the prosecutor needs to prove that you intended to write a bad check and that the company accepting the check didn't know there were no funds. Good luck with that.

At the time the payday loan company accepted your post-dated check or future bank account withdrawal, they knew you didn't have those funds in your account. Duh. That's the whole point.

And how are they going to prove you didn't plan to have the money in your account later? Unless you were planning not to repay from the very start and they can prove it, they wouldn't stand a chance prosecuting you for a bad check. They know it. You haven't committed any crime. The cops wouldn't care.

If you want to eavesdrop on what would probably happen if they tried to get a cop to arrest you, here ya go. A fellow who works in a county office asks, what do you do when these payday loan companies come in, wanting us to prosecute people for bad checks? And most of the other counties tell him, we just ignore them. We don't like 'em anyway.

But it might get even better for you.

Payday loan companies are regulated in most states, and the laws vary a lot, including things like the odd "Credit Access Bureau" loans in Texas where two companies are involved. Figure out which state laws apply to you. If you got the payday loan at a storefront business in the same state you live in, obviously the laws of your state apply. If you got a loan online, it might be the laws of the state the company is in, or the laws of your state, so check both.

Then look up the state laws written in plain language at this site. Another source of payday loan laws in each state is here. The laws might not be totally up-to-date, and the legal language is hard to wade through, but try looking for words like "criminal" or "prosecuted" and see if there's an actual specific prohibition against criminal charges.

For example, in Arizona, the law actually says: An individual who issues a personal check to a payday loan place is not subject to criminal prosecution. In Kentucky, every payday loan place has to actually post a sign that says nobody will be prosecuted or convicted of writing cold checks or of theft by deception.

If you're really lucky, you might even find out that out-of-state internet loans are illegal in your state, and the company was breaking the law by loaning you the money in the first place.

Don't rely on me or other random strangers on the internet, if you really want to know where you stand. Talk to a lawyer. Sometimes lawyers will give you a free initial consultation, especially if you mention you're thinking about suing a bill collector for unfair collection practices.

But here's the bottom line: Don't let collectors bully you. Find out the law. You're not going to find any cops knocking on your door. You're not going to jail.

That doesn't mean you can just forget about paying back the loan. You do owe the money, and they can probably sue you in civil court, add a bunch of costs and fees and interest, garnish your wages or put a lien on your property. You don't want that. Talk to them before it gets that far. See if you can get another loan, or borrow money someplace else to pay it back, or do anything you can rather than default. You can also check out services that help you consolidate or cut your debt and repair your credit score.

But don't let them scare you. You're not going to jail.

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