When a person defaults on a payday loan, there are a few negative consequences that can occur such as increased fees, calls from collection agents, and civil lawsuits. One common misconception, however, is a person can be arrested and put in jail for failing to repay a payday loan lender. This is not true, and any collection agent who claims otherwise is setting themselves up for a personal injury lawsuit. Here’s why.
State and Federal Prohibitions Against Arrest for Debts
Non-payment of debts is considered a civil matter. There are state and federal laws that prohibit debt collection companies from attempting to have debtors arrested and charged with a crime for simply not repaying money owed. In fact, collection agents are barred from even threatening to have people arrested for not paying debts and can face quite a few legal consequences for doing so including being sanctioned by the Federal Trade Commission.
Some collection agents attempt to get around this prohibition by claiming payday loans are different from other types of debt because the loans are secured using post-dated checks. They try to use a state’s “Hot Check” or “Theft by Check” laws (ex. Virginia’s bad check laws) to claim debtors committed fraud by allowing their checks to bounce and submit paperwork to the local court to have them criminally charged.
However, this course of action is wrong for two reasons. First, most states such as Texas have specifically adjusted the law to categorize checks related to payday loans as civil rather than criminal matters. Second, to successfully have someone charged with fraud for passing a bad check, the company has to prove the person wrote the check knowing the money would not be there when it would be presented to the bank. Unless the person wrote a check on a closed bank account, this is exceedingly difficult to prove.
So a collection agent who claims he or she will have you thrown in jail for not paying the loan when it comes due typically will not have the legal standing to follow through on the threat. Even if he or she manages to get criminal charges filed, there typically won’t be enough evidence to support a conviction.
As noted previously, these threats and actions go against the Fair Debt Collection Practices Act, and you can sue for compensation for damages caused by the agent’s actions. In addition to collecting up to $1,000 for the violation, you can also sue for filing false criminal charges, intentional infliction of emotional distress, loss of wages, and other damages that result if the company actually follows through and finds a way to have you arrested and charged criminally for the debt.
Taking Advantage of Problematic Courts
Unfortunately, some payday loan lenders and collection agencies have found methods to get debtors arrested for unpaid loans. This occurs in a couple of ways.
Some court districts are so overburdened with cases that the people who are supposed to monitor for this type of abuse fail to do so, and the payday lenders are able to successfully get charges brought against debtors. A Texas advocacy group uncovered this exact type of situation in many of the districts in the state. According to their research, about 1,576 people had criminal charges brought against them in part because it appears the courts were simply signing off on affidavits from payday loan lenders without closely examining them for validity.
The second way debtors have been sent to jail over payday loans is through contempt of court and similar charges for failing to show up to their court appointments for civil lawsuits brought by payday loan companies. This was something that regularly occurred in Missouri before the law was changed. Payday lenders would abuse court procedures and make excuses to get new court dates set in the hopes the debtor would fail to appear for one of the appointments. If the debtor did fail to show, the attorney for the creditor would then request the court place a “body attachment” on the person, which is basically an arrest warrant. The debtor would then be forced to pay a bond, typically in the amount owed to the creditor, to be released. The bond is then given to the creditor to satisfy the loan.
It is illegal for creditors to use the criminal court system to collect debts, but as previously demonstrated it does happen. However, you can fight back and make the company pay for the damage it does to your life and reputation. Connect with a personal injury attorney, such as Breslin & Breslin/lawyers to develop a litigation plan to help you recover your losses.