Can You Go to Jail for Unpaid Payday Loans in California?

NO! California has strict consumer protection laws that will never allow this to happen. In California, you can’t go to jail for any unpaid private debt (payday loans, payday advances, installment loans). If there is a payday lender that is threatening to call the police on you for not paying a payday loan, we recommend that you reach out to the California Department of Business Oversight to report that abuse.

The California Deferred Deposit Transaction Law

The relevant sections of the California Deferred Deposit Transaction Law are in Section 10 of the California Financial Code. Section 23035.b reads “A customer who enters into a deferred deposit transaction and offers a personal check to a licensee pursuant to an agreement shall not be subject to any criminal penalty for the failure to comply with the terms of that agreement.” Additionally, Section 23035.c.3 reads “(3) That the customer cannot be prosecuted in a criminal action in conjunction with a deferred deposit transaction for a returned check or be threatened with prosecution.”

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Civil Versus Criminal Court

A payday lender is allowed to threaten to take you to civil court for the unpaid balance of your loan, but this would be in a civil proceeding. It is important to understand that if you are served a summons (a notice to appear in civil court) you are obligated to appear in court to defend yourself. It is important not to ignore a summons to appear in civil court, because a judge can issue a “bench warrant”. If you have an unpaid payday loan with some lenders, it is possible that they will attempt to bring you to court for the unpaid balance of the loan if you are not making a good-faith effort to pay it back.

Always Consider the Rates & Terms

All of these concepts reinforce the importance that you must ALWAYS carefully consider the terms of any loan which you are applying for. Rates and terms offered by payday lenders can vary. It is important to have a clear plan in place for how you will repay your loan and manage other recurring expenses.

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