This week, three people asked me: "I took out a payday loan and I can't pay it back. Will the cops arrest me? Can I go to jail?"
At first I thought it was just a coincidence, since people are always asking me crazy stuff.
Then I found out what was going on. A couple of the payday loan places in the city switched to a new scummy collection agency. These bottom-feeders threaten people all around the country, it just hadn't happened here lately. Maybe you've got the call too. "If you don't pay by closing time today, we'll send the police to have you arrested tomorrow."
Nobody wants to get a call like that. But you think, "Wait a minute. They can't arrest people for not paying a loan. Sue them, yes. But nobody goes to jail for being overdue on a credit card or a mortgage."
Here's what they tell you: "This is different. You wrote a bad check" (if you gave a post-dated check). Or, "You committed bank fraud" (if you authorized a transfer from an account that had insufficient funds).
And yes, you may know somebodywho's actually been arrested for that.
"Geez," you think, "This is bad."
But it's not. Heck, they might even be the ones breaking the law.
I'm not a lawyer (thank god), but this is how I understand it. To find you guilty of writing a bad check, the prosecutor needs to prove that you intended to write a bad check and that the company accepting the check didn't know there were no funds. Good luck with that.
At the time the payday loan company accepted your post-dated check or future bank account withdrawal, they knew you didn't have those funds in your account. Duh. That's the whole point.
And how are they going to prove you didn't plan to have the money in your account later? Unless you were planning not to repay from the very start and they can prove it, they wouldn't stand a chance prosecuting you for a bad check. They know it. You haven't committed any crime. The cops wouldn't care.
If you want to eavesdrop on what would probably happen if they tried to get a cop to arrest you, here ya go. A fellow who works in a county office asks, what do you do when these payday loan companies come in, wanting us to prosecute people for bad checks? And most of the other counties tell him, we just ignore them. We don't like 'em anyway.
But it might get even better for you.
Payday loan companies are regulated in most states, and the laws vary a lot, including things like the odd "Credit Access Bureau" loans in Texas where two companies are involved. Figure out which state laws apply to you. If you got the payday loan at a storefront business in the same state you live in, obviously the laws of your state apply. If you got a loan online, it might be the laws of the state the company is in, or the laws of your state, so check both.
Then look up the state laws written in plain language at this site. Another source of payday loan laws in each state is here. The laws might not be totally up-to-date, and the legal language is hard to wade through, but try looking for words like "criminal" or "prosecuted" and see if there's an actual specific prohibition against criminal charges.
For example, in Arizona, the law actually says: An individual who issues a personal check to a payday loan place is not subject to criminal prosecution. In Kentucky, every payday loan place has to actually post a sign that says nobody will be prosecuted or convicted of writing cold checks or of theft by deception.
If you're really lucky, you might even find out that out-of-state internet loans are illegal in your state, and the company was breaking the law by loaning you the money in the first place.
Don't rely on me or other random strangers on the internet, if you really want to know where you stand. Talk to a lawyer. Sometimes lawyers will give you a free initial consultation, especially if you mention you're thinking about suing a bill collector for unfair collection practices.
But here's the bottom line: Don't let collectors bully you. Find out the law. You're not going to find any cops knocking on your door. You're not going to jail.
That doesn't mean you can just forget about paying back the loan. You do owe the money, and they can probably sue you in civil court, add a bunch of costs and fees and interest, garnish your wages or put a lien on your property. You don't want that. Talk to them before it gets that far. See if you can get another loan, or borrow money someplace else to pay it back, or do anything you can rather than default. You can also check out services that help you consolidate or cut your debt and repair your credit score.
But don't let them scare you. You're not going to jail.
8:22 p.m. January 6
Nobody ever actually told me WHY the cops wouldn't arrest you. Thanks for posting this. Believe me, I know somebody who'll be glad to hear this.
9:33 a.m..January 7
There's also federal law, the FDIC law concerning Debt Collection Practices, to be exact. Scroll down almost to the bottom, Section 818, to the part where it says what kind of checks that bad check enforcement programs can't go after: "(1) a postdated check presented in connection with a payday loan..." Click on the FDIC law link and read the whole thing.
11:59 a.m. January 7
They can still arrest you.
1:32 p.m. January 7
Uh, no they can't.
8:12 p.m.January 7
I ought to point out that a payday loan doesn't mean you can steal money and get out of jail free. If you really are committing fraud, you will go to jail. I mean some trick like taking out a loan one day, then closing your bank account, quitting your job and leaving town the next. Or using a fake ID and skipping off with the money. That kind of thing. Everything above only applies if you were honest and just ran into some hard times and couldn't pay. Also, if they file a legitimate civil suit against you to collect and you just totally ignore it, you can get arrested for that just like you can get arrested for ignoring too many parking tickets.
8:40 p.m. January 7
3:05 p.m. January 8
Sue their ass. Seriously. Read this. See all the things that debt collectors aren't allowed to do. I'm talking about actual collection agencies, not the payday loan company employees. Get a recorder for your phone and make sure it's legal in your state so it'll hold up as evidence. I think you only need to ask the other guy for permission to record, if you or he is in Florida, Connecticut, Pennsylvania, California, Illinois, Maryland, Massachusetts, Washington, Michigan, Montana, Nevada or New Hampshire. Otherwise, record away. Get the evidence, then get a lawyer to take the case on contingency, because the bad guys have to pay all the lawyer's fees when you win. You can sue and if you win, the collector has to pay any damages you suffered, or the judge can order the collector to pay you up to $1,000 even you don't have actual damages. You still owe the debt, if it's a legal debt, but still. Check it out at the link.
11:51 p.m. January 8
Wow. Just, wow. I know some dirtbags who are going to be sorry they ever picked up the phone. Good info. Thanks, Johnsons. Wow.
9:23 p.m. January 9
Johnsons-R-Us usually has some-thing helpful in the comments, but he really kicked ass this time. It made me wonder what the best way to record a phone conversation is. So I asked a friend who does it for his job. "You want the cheap way or the expensive way?" he asked. "Cheap," I said, "but it has to actually work." So he told me about this Olympus TP-7 Telephone Recording Device. The name's kind of misleading, because it's just the microphone. You still have to plug it into a recorder. If you have a recorder, you're all set. If not, you can get something like this little Olympus digital voice recorder that'll let you upload recordings to your PC and everything. But anyway, you wear the phone recording device in your ear like a secret serviceman, then hold the phone up to that ear. It records what the other person says, as well as your voice, too. Cell phone or landline, either one. He let me try it. Pretty neat. You feel like James Bond. You don't need to buy one unless you want to record a phone call, then it would be pretty handy.
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