Statute of Limitations to Collect Payday Loans

Payday loans are a type of short-term debt that could help you come up with cash on a moment's notice. In an emergency, these loans can be very helpful. If you cannot afford to repay them, the lender can take collection actions against you. However, the lender has to act within the statute of limitations when collecting this debt.

Payday Loans

Payday loans are a type of short-term loan that involves borrowing against your future earnings. With this type of loan, you typically write a check for the amount you are borrowing and the finance charge. Then when you get paid, the lender can cash the check or take the money out of your bank account, depending on the terms of the agreement. If you cannot afford to repay the loan, the lender can charge extra finance charges and late fees.

Statute of Limitations

As with other types of debt, payday loans have a statute of limitations associated with them. The statute of limitations is the amount of time that a creditor can sue you to collect a debt. The laws concerning statutes of limitations are set by state governments. In some cases, the statute of limitations might only be two to four years. In other states, the payday loan company may be able to come after you for 15 years to collect the debt.

Type of Debt

To determine what the statute of limitations is in your state, you need to first determine what kind of debt a payday loan is considered in your state. In most states, this kind of debt is considered to be a written agreement with a definite payment date. In other states, it may fall under some other category of debt. Not all states agree on how debts are classified and because of this, large discrepancies in statute of limitations can be found.

Collection Actions

If the debt is still within the statute of limitations, you can expect a payday lender to try every means available to try to collect it. The payday lender will most likely try to sue you while the statute of limitations is in effect. After the statute of limitations has expired, the creditor can still try to sue you, but you can use the defense of an expired statute of limitations. The creditor can also try to collect the debt without the threat of legal action as you still technically owe the debt.