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 pay check. But life happens sometimes and paying that loan back doesn’t always happen as fast as desired. 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, Not Repaying a Payday Loan is NOT a Felony

Let’s get the most serious concern out the way first. No, not repaying a payday loan is not a felony. In fact, it is actually illegal for lenders to threaten consumers with felony charges. According to Consumer Finance Protection Bureau, customers cannot be arrested for refusing or being unable to pay back a payday loan. Now, lenders can take them to court to collect money from the loan as part of collections tactic. And if customers do not attend these court hearings, that action could lead to an arrest but not the inability to pay the loan.

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

Tactics Payday Loan Lenders Could Take To Get Their Money Back

Voluntary withdrawal of funds

If bank account information was obtained as part of applying for the payday loan, lenders could use that information and help themselves to withdrawing the amount from a consumer’s bank account. Lenders could take the entire amount or smaller amounts with little to no notice. And if there are overdraft fees from these attempts, they will be the responsibility of the customer.

Collection Calls and Letters

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

Court Summons

Some payday lenders will go so far as to seek the courts assistance in collecting 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.

Roll Over 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 roll overs are almost always expensive.

What To Do if You’re Being Threatened

In the event a lender threatens consumers with jail time, the Consumer Finance Protection Bureau advises them to contact the appropriate state attorney office per the National Association of Attorneys General website or the appropriate state banking regulator office. These sources will assist consumers in providing legal recourse in dealing with the threats from payday lenders. If these lenders are found to be participating in wide-spread illegal actions against consumers, sources like the state attorney general offices and banking regulators could commence class action lawsuits against these companies as well.

How To Pay Back a Payday Loan While In Financial Difficulties

Like with any debt, it can be challenging to keep up with bills when facing financial problems. But there could be ways 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 unsecure debt (i.e. student loans, payday loans, personal loans, credit cards) consumes over half of a consumer’s income, bankruptcy could settle payday debt.


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