The short answer is yes, a payday loan company can take you to court if you don't pay your debt. To be taken to court, you must be behind on your payments and have violated your loan agreement. In fact, if you get a court summons for a paycheck loan, it's likely from a collector. If you don't pay your payday loan, there's a chance your lender will sue you to secure the money you're owed.
A PAL is a short-term loan with high interest rates and annual percentage rates, offering a simple application process. The person who calls the payday lender on the phone may try to convince you that you could go to jail, but this is not true. It is illegal for a payday lender to threaten to put you in jail or criminally prosecute you for an unpaid debt. In many states, when suing a debtor, a payday lender or collector must provide a copy of the original loan agreement.
Even if a creditor hasn't sued you yet, if your income is exempt, you should be aware of the possibility of a payday lender seizing it. The bank or credit union then withholds an amount for the payday lender or collector as permitted by your state's law. Failing to pay back your payday loan can drain your bank account, trigger wage garnishment, collection calls, and lawsuits. If you can't repay the full amount of the loan, but can afford to pay some of it, you can try negotiating a repayment plan with the lender.
By writing a check to your account or authorizing the payday lender to withdraw money directly from the account, you give the payday lender permission to withdraw money from your account, regardless of the type of funds in the account. When you get a payday loan, you're signing a legally binding contract that can't be broken without repercussions. You can also file a complaint with the DFI if payday lenders harass you by calling your home or work more than a few times a day, showing up at your workplace, talking to your children about debt, etc. Rather than taking borrowers to court, payday loan companies would prefer to negotiate with them out of court since they are more likely to receive what is owed to them. However, some payday lenders have succeeded in using bad check laws to file criminal complaints against borrowers and judges have mistakenly sealed complaints.
Payday lenders will work with customers in an attempt to secure money owed in a way that is beneficial for both parties. Unfortunately, yes, any creditor including payday lenders has the right to sue you and take you to court if you fail to meet your payments or violate your loan agreement.