Payday Lenders Can Take You to Court: Here's How to Prevent It

Have You been threatened with a lawsuit? If so, DebtHammer may be able to help. Tap "Learn More" to get more information.


If a lender or debt collector contacts you and says they’re taking you to court if you don’t pay them immediately, you should take that threat very seriously. 

Yes, payday lenders can sue you

It’s important to understand that any creditor — including a payday lender — has the right to sue you and take you to court if you fail to make your payments or otherwise violate your loan agreement. This is also true if you fail to repay personal loans, credit card bills, medical bills and even some student loans. When you obtain a loan, you’re signing a legally binding contract. You’re violating the contract when you fail to make your payments as scheduled.

But even though lenders can follow through on their threats, they usually don’t want to. Court proceedings, even in a small-claims court, are expensive and time-consuming. Payday loans are usually less than $1,000. In many cases, court costs would be higher than what they’d collect through a judge’s order.

Because of this, payday loan companies and debt collectors would rather negotiate with you outside of court. This can help you avoid a costly and inconvenient court appearance.

Stuck in payday debt?

DebtHammer may be able to help.

Be proactive

Court is inconvenient for both lenders and borrowers. That’s why payday loan companies will prefer negotiating with you outside of court. They will get to keep more of what they’re owed, even if you don’t repay the total amount you owe.

Pro tip: This means that as soon as you realize you can’t repay your payday loan as scheduled, you should contact your lender and make another plan. Ask your lender for an EPP loan or head to a credit union and apply for a Payday Alternative Loan.

By being proactive and staying in contact with your lender, they will know you’re making an effort and be less likely to threaten a lawsuit against you. 

If you stop ACH transfers and ghost your lender, they will be more likely to get aggressive, and that increases your odds of a court appearance.

READ MORE: How to get out of payday loan debt

Don’t call their bluff

If your balance is small, you can gamble that your lender doesn’t want to pay court costs. However, that’s a mistake. Even if the lender doesn’t take you to court, your debt will be handed over to a debt collection agency, which can also take you to court.

Pro tip: Before the problem spirals out of control, talk to your lender. See if you can arrange for an extended payment plan to buy some time. You are not the first person to struggle to repay a payday loan. Almost 80% of payday loan borrowers can’t repay their first loan.

What to do if you receive a payday loan court summons

If you get a court summons, whether it’s expected or a surprise, do not panic. This is not the end of the world. You usually don’t even need a payday loan lawyer to present your case.

The key is to show up for any court appearance. DO NOT IGNORE A COURT SUMMONS.

Unfortunately, most borrowers who take out payday loans can also have difficulties making it into court for their proceedings because they:

  • Can’t afford to take time off work
  • Can’t pay for transportation to the courtroom
  • Are too afraid to show up

But if you’re sued by a payday lender and fail to appear on your scheduled court date, the judge will automatically rule in their favor. This happens often, and the court will work to collect your debts, usually by ordering wage garnishment.

If you’re summoned to court, show up. Some lenders will gamble on your failure to appear and won’t be prepared actually to argue the case before a judge.

Unfortunately, if your lender comes prepared, you won’t have much of a legal defense unless:

  • You have evidence of fraud (someone who stole your identity took out the payday loan.)
  • You can prove the lenders used illegal tactics like threatening you with jail time.

However, by showing up, you won’t have to deal with possible contempt of court charges that could land you in jail, and even if the judge agrees to garnish your wages, at least you get to defend yourself, which may help lower the percentage of your wages that are garnished.

What will happen in court?

For a case surrounding payday loans, court proceedings will be straightforward. Small-claims court, where your hearing would be held, isn’t like the courtroom scenes in TV shows.

You and your lender will each tell your side and present evidence, often without legal representation, and the judge will make a ruling. There won’t be a jury.

But since most lenders aren’t expecting you to show, they may not bring any evidence to back up their claims, which would mean you’d win by default.

The burden of proof lies with the payday lender, though they’ll only need to demonstrate a “preponderance of evidence” that you’re guilty of owing them money and failing to pay.

Pro tip: According to the Legal Information Institute at Cornell University, proving your case by the preponderance of the evidence requires demonstrating that the allegation is more likely true than not true. That’s a fancy way of saying that they need to prove that it’s “more likely than not” that you’re guilty, as opposed to “beyond a reasonable doubt” (which is much more difficult).

READ MORE: Is failing to repay a payday loan a felony?

You probably won’t go to jail

No, you will not go to jail for not paying payday loans, no matter what your lender or a debt collector might say. You can, however, land in jail for other reasons for lack of repayment.

There are two basic types of court proceedings:

  • Civil: Disputes between individuals or organizations where a successful plaintiff is awarded compensation for damages
  • Criminal: Disputes between the government and an alleged criminal offender where an unsuccessful defendant is punished with fines and jail time (and, in rare cases in some states, death.)

Payday lenders can only sue you in civil court, meaning a conviction will never land you in jail.

READ MORE: Will I go to jail for failing to repay a payday loan?

Know your rights

The Fair Debt Collection Practices Act specifies how debt collectors can communicate with you, including any information they must provide to you.

If a debt collector contacts you about your debts, you may have concerns about whether the debt collector is legitimate, if the debt is yours, or if the amount the collector seeks to collect is accurate.

The FDCPA makes it illegal for debt collectors to harass or threaten you when trying to collect on a debt. When the Consumer Financial Protection Bureau’s new Debt Collection Rule became effective, it clarified how debt collectors can communicate with you, including what information they’re required to provide at the outset of collection about the debt, your rights in debt collection and how you can exercise those rights.

When a debt collector first contacts you, they must provide certain information about the debt. When the information is provided in writing or electronically, it’s called a debt validation notice.

If a debt collector calls and you have not gotten a written confirmation of your debt (this is called a debt validation letter), request one immediately.

If you’re having an issue with debt collection and suspect your rights have been violated, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). You can also countersue if a lender ultimately takes you to court, so it’s best to document any collector actions that might violate the FDCPA.

Can a payday lender garnish your wages?

A payday lender cannot directly garnish your wages. However, a judge can. If the judge rules against you in your hearing because you ignored a court order to show up or because the lender came prepared, your wages will be garnished to help pay off what you owe.

Wage garnishment requires your employer to withhold a portion of your earnings to pay down your debt, though there are hard limitations on what they can take from you.

READ MORE: Payday loans and wage garnishment

Payday lenders can’t sue you after your state’s statute of limitations has expired

Much misinformation is circulating about when payday lenders can sue you. For example, many believe that a payday lender can’t sue you after seven years. That’s not always true. Whether or not you can still be sued depends on your state’s statute of limitations on debt.

A statute of limitations is a law that restricts the amount of time someone must sue for damages they’ve suffered. Therefore, a statute of limitations on debt is the time a creditor or debt collector must sue a borrower for defaulting on their account. The number of years varies by state but ranges from three to 10 years.

This means that in some states, like North Carolina, payday lenders can’t sue you to collect unpaid payday loans after three years, but in other states, like Iowa and Kentucky, you can be sued for unpaid payday loans for up to ten years.

Pro tip: An unpaid loan will be removed from your credit report after seven years, no matter your state’s statute of limitations.

READ MORE: Statutes of limitations on debt for each state

Struggling to pay back your payday loans?

See if DebtHammer is a good fit to help! (It’s free to ask)

Can I sue a payday lender?

Yes, you can sue a payday lender, and you should if you have proof that they’re breaking the law. It can help you get your loan forgiven and discourage predatory lending practices, which can only be a good thing.

Unfortunately, the regulations for payday lending aren’t very strict right now. Unless you live in one of the states where payday lending is illegal, your best bet would be to document proof that they’re threatening you in some illegal way.

Are the lawsuit threats due to a hot check?

Writing a bad check, or hot check, is illegal. Anyone who writes a bad check is usually charged a fee. If you try to pass a bad check intentionally, the charge can range from a misdemeanor to a felony (a criminal charge that theoretically could mean jail time.)

Payday loan companies often threaten to file hot check charges with your local district attorney if you default.

This will certainly be a bluff because payday lenders do not have the legal authority to file criminal charges, and they have no say over whether the police or district attorney will choose to pursue the case. Don’t let them bully you. You can potentially sue over these threats because they violate your federal rights.

Try other debt-relief options

These can include:

The bottom line

A payday loan lender can sue you if you default on your payments. It’s best to pay back what you owe to avoid being sued. If you can’t pay it all back in one lump sum, contact the lender and try to work out a payment plan before heading to court.

Even if you can’t sue your payday lender, you can find other ways to fight back.

If you’re struggling with payday loans, using an expert’s services can be a great help. DebtHammer can serve as a middle-man between you and your payday lender. We’ll stop their threats, negotiate down your loan amount and monthly payments, and create a workable plan to get you out of debt for good. Contact us for a free consultation so we can help you fight back against your payday lenders today.


Can I be sued for medical bills?

Yes, you can be sued for medical debts. However, it isn’t likely any creditor will be able to garnish your wages to collect.

What is a lien, and can payday lenders use one?

Suppose you do not repay a payday loan. In that case, the payday loan company has several legal remedies, including wage garnishment, levy, and lien, which is a legal claim or a right against a property.

Can I be sued for credit card debt?

Being sued for credit card debt means someone claims you borrowed money that you failed to pay. The balance is what they claim it to be, and you are legally obligated to pay this company.

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