Can I Be Arrested for Payday Loans?

Taking out a payday loans is a means for an individual to get his hands on some cash quickly for a short period of time. However, the penalties for failing to pay back a payday loan are steep. Not only will the lender likely charge late fees to the borrower but, if the loan is large enough, he might initiate other legal actions against him. However, under no circumstances can the borrower be arrested for failure to pay.

Debtor's Prisons

Debtor's prisons, in which a person is arrested and jailed for failing to pay back money he owes, do not exist in the United States. They are banned by federal law. (A single exception exists for parents who are delinquent in paying child support.) Therefore, a person who owes money on a payday loan cannot be arrested for failing to pay back that loan, no matter how late he is or how much he owes.

'Hot' Check Laws

Some states have laws that make it a criminal offense to pass a "hot" check, a check that the person knows will not clear when the recipient attempts to cash it. Many payday lenders demand that borrowers provide a postdated check, which the lender can cash when the debt comes due. Even if this check does not clear, the borrower cannot be charged with violating a state's hot check law, unless the lender can prove the borrower intended to not pay back the debt.

Penalties

Not only can a person not be arrested for failing to pay back a payday loan, but lenders are not allowed to falsely threaten incarceration to debtors. Doing so is a violation of the Fair Debt Collection Practices Act, a federal law. If a lender does falsely threaten imprisonment, the debtor has the right to sue the lender for damages. However, the debtor is still not absolved of his original debt to the lender.

Exceptions

While a debtor can't be arrested for failing to pay a debt, he can be arrested for other offenses that indirectly stem from his failure to pay the debt. For example, if the lender brings a lawsuit against the debtor, the judge hearing the case may issue a number of orders to the defendant. If the debtor fails to comply with these orders, the judge may hold him in contempt of court, which is punishable with jail time.