Is it a Felony to Not Pay a Payday Loan?

Payday Loan Felony

When most people obtain a payday loan, it’s to get cash fast for a financial emergency of some sort. And then they pay the loan off with their next paycheck. But life happens sometimes and paying that loan back doesn’t always happen as fast as planned. In fact, some customers need several weeks or more to pay back their loans. Or some find they can’t pay it at all.

So what does happen when a payday loan is not paid off in the time allowed? Will lenders consider it a felony and seek legal resolutions to get their money back?

No, failing to repay a payday loan is NOT a felony

Let’s get the most serious concern out the way first. No, it isn’t a felony if you don’t repay your payday loan. In fact, it is actually illegal for lenders to threaten borrowers with felony charges. According to Consumer Finance Protection Bureau, customers cannot be arrested for refusing or being unable to pay back a payday loan.

But lenders can take borrowers to court to collect money from the loan as part of the collections strategy. And if borrowers ignore the summons and don’t attend these court hearings, the judge will decide the case without you, and that could lead to an arrest. But it won’t be because of the inability to repay the loan.

However, there are other legal tactics payday loan lenders can do to get their money back.

Tactics payday loan lenders may use to get their money back

Voluntary withdrawal of funds

If bank account information was obtained during the payday loan application process, lenders could use that information to withdraw the amount from a borrower’s bank account. Lenders could take the entire amount or smaller amounts with little to no notice. And if these attempts trigger overdraft fees, they’re the borrower’s responsibility.

Collection calls and letters

Consumers may find the collection call attempts to be pretty aggressive when dealing with payday lenders who are trying to get their money back. They may also find that they are getting sternly worded letters in the mail more frequently from legal offices representing the payday lender attempting to collect the debt.

Court summons

Some payday lenders will go so far as to seek the courts’ assistance in collecting the debt. In doing this, lenders are usually just trying to get their money back; they typically have no desire to send anyone to jail. As mentioned above, the customer is required to show up for a court hearing. And while it may sound scary, it could be a good time to reason with the lender and even set up a payment plan to get the loan paid off gradually or negotiate a smaller amount. If customers are in a dire financial situation, sometimes the mention of bankruptcy as an option could make payday lenders more sympathetic to working with them. Bankruptcy could mean the lender doesn’t get paid at all.

Rollover loans

If customers are unable to pay the original loan amount, they may ask the payday lender to “roll over” the debt into a new loan. This usually does not result in annoying collection calls or letters, but it will mean the new loan will consist of new fees and charges in addition to the debt from the initial loan. And the fees associated with rollovers are almost always expensive.

What to do if you’re being threatened

If a lender threatens consumers with jail time, the Consumer Finance Protection Bureau advises them to contact the appropriate state attorney general’s office — which can be found at the National Association of Attorneys General website — or the appropriate state banking regulator’s office. These sources will help consumers with legal options to deal with the threats from payday lenders. If these lenders are found to be participating in widespread illegal actions against consumers, sources like your state’s attorney general office and banking regulators could start class-action lawsuits against these companies as well.

How to pay back a payday loan while facing financial difficulties

Like with any debt, it can be challenging to keep up with bills when facing financial problems. But there could be ways to work with the payday lenders so both parties win.

Debt consolidation

Seeking help from a reputable debt consolidation company could help consumers and lenders in a big way: customers pay an agreed-upon monthly payment to the consolidation company and the lender gets paid. Collection calls and letters stop and the payday company gets their money back.


Bankruptcy seems extreme for payday loans, considering the small amounts they usually are. And as mentioned earlier, payday lenders may not like the word ‘bankruptcy’ but sometimes the consumer may not have a choice. If unsecured debt (i.e. student loans, payday loans, personal loans, credit cards) consumes over half of a consumer’s income, bankruptcy could settle payday debt.


Scroll to Top