An Internet payday loan is a small, short-term loan taken out from an Internet website. Typically, payday lenders charge high rates of interest, as well as steep penalty fees in the case of late payment. When a borrower agrees to borrow money from a website, he enters into a legal contract with the lender. If a borrower defaults on a payday loan, either in Texas or in another state, he can be sued, although the lender will not always exercise this right.
Payday Loans
When a borrower takes out a payday loan, whether over the Internet or not, he signs a contract agreeing to repay the loan within a certain time period. According to Texas law, if a borrower fails to uphold the terms of a contract, he is guilty of a breach of contract and is liable for damages. To collect the money owed him, the lender may take a number of actions, including filing suit in civil court.
Civil Suit
One of the main reasons that a lender may choose to sue a borrower in civil court is that filing a civil suit is a prerequisite for the lender to take certain actions to collect on the loan. For example, in order to garnish a borrower's wages or place a freeze on his bank account, the lender must first file a civil suit and receive a judgment saying that money is legally owed to him.
Considerations
While an Internet lender has the right to file suit to collect a payday loan, it is not always in his financial interest to do so. In many cases, the cost of hiring an attorney and filing a motion with a civil court will exceed the total amount of loan. For this reason, the lender may choose instead to negotiate a payment plan with the borrower or agree to settle the debt for a lesser amount.
Statute of Limitations
Texas, like all states, has a statute of limitations on how long a creditor can attempt to collect on a debt. In Texas, the statute of limitations on payday loans is four years. After four years, the creditor is no longer allowed to attempt to collect on the loan. While the creditor may sue the debtor after the statute of limitations has expired, the case has no merit and will be thrown out of court.
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