If you don't pay your payday loan, the payday lender or a debt collector can usually sue you to collect the money you owe. If they win, or if you don't challenge the lawsuit or demand, the court will issue an order or judgment against you. The order or judgment will indicate the amount of money you owe. The short answer is yes, a payday loan company can take legal action against you if you fail to pay your debt.
To be brought to court, you must be behind on your payments and in violation of your loan agreement. Yes, a lender can take you to court, and if they win, you'll have to repay whatever the court has issued. Payday lenders will work with customers in an attempt to secure the money owed to them in a way that benefits both parties. However, if no other resolution can be found, they may take the matter to court.
Taking a customer to court is always the lender's last resort, as it's expensive and not always successful for them. In fact, if you get a court subpoena for a paycheck loan, it's likely from a debt collector. Going to court is uncomfortable and costly, and it usually costs more in legal fees than the loan they are trying to recover. You can also file a complaint with the DFI (Department of Financial Institutions) if payday lenders harass you by calling home or work more than a few times a day, showing up at your workplace, talking to your children about debt, etc. If you're stuck in payday loan debt, you've probably received your fair share of threatening collection calls. When your loan is due or before it expires (even if it's your first loan), if you tell your payday lender that you can't repay the loan when it's due, they should tell you that they can have an installment payment plan (a repayment plan).
Failure to repay your loan quickly could have several results, including a negative impact on your credit score (making it difficult for you to borrow money in the future), wage garnishment, and debt collectors. However, it's highly unlikely that you'll go to jail for not repaying your loan. Under Washington law, you must first pay off an existing loan before you can apply for another loan with that lender. When the borrower inevitably proves that he can't pay the fees and interest on the quick loan, the lender will start making phone calls. Debt collectors often sue payday lenders, sometimes for many times more than the original loan amount. If the payday lender has your checks or authorization to access your account, you don't have to sue them to get paid.
Federal law limits to 36% what APR payday lenders can charge military families based on payday, anticipated tax refund and title loans. Generally, when collecting or trying to collect a quick loan, the lender cannot harass or intimidate you. You could end up taking out several loans in a year because you end up requesting one every payday to repay the last one or to pay other bills.