19 Nov Can You Go to Court Over an Unpaid Payday Loan?
Yes it is possible for you to be taken to court if you have taken out multiple payday loans and failed to pay them back. In this scenario, a lender might decide to take you to court in order to be able to issue a county court judgement (see CCJ loans for more information.)
On the other hand, the answer is likely to be no if you have just one payday loan outstanding and the loan amount is relatively small. This is also partly down to the fact that it is not usually worth the payday lenders time financially to take the matter to court. Most payday loans involve just a few hundred pounds of debt and a court case may cost just as much as the debt itself.
However, it is always worth paying back your loans on time, since failing to pay can increase fees and damage your credit rating. We take you through the likely outcomes you could face if you end up defaulting on your payday loan.
Multiple contact attempts are made to collect funds
A payday lender will contact you by mobile, landline, email and letters before taking any further action if you have defaulted on your loan. However, as lenders are regulated by the Financial Conduct Authority, this means they must abide by certain rules when trying to recollect the debt.
That means that there are only a certain number of times a day and per week that they will be allowed to contact you.
What happens instead of a payday lender taking you to court?
If a lender does not take you to court, they may recuperate the money through debt collectors instead. This is because most payday lenders prefer to work with debt collectors than go through the court system, due to the expense and the complicated nature of it.
Debt collection for a payday loan
If you have not paid the loan back or contacted your lender about an alternative payment plan, they may contact professional debt collectors to get involved.
This will usually be after a certain amount of time has passed. Typically, two months will pass before the case is taken to a debt collection agency.
The debt collector will contact you on behalf of the short term lender to sort out the money. At this stage, you will need to deal with the debt collector as opposed to the payday lender directly.
It is worth keeping in mind that you will need to pay additional fees alongside the payday loan amount if the case has been passed onto a debt collector. This is in order to cover the costs of asking debt collectors to recuperate the money.
What happens if you have no money in your account?
If you have no cash in your account when the continuous payment authority payment is due other attempts will be made before alternative arrangements are organised.
Most lenders will attempt to take payment from your account on the agreed repayment date at 5am. This attempt is usually made a few times over a certain period before further action is taken.
As soon as you have become aware of problems with your account, you should make sure you contact your payday lender as soon as possible. This is so you can sort out an alternative payment plan that is more affordable for you. See different ways to pay off loans here.
Most lenders partnered with Badger Loans are willing to work with you and provide flexibility with their payment plans if you are struggling.
This is why it is always worth contacting the payday loan firm if you are having difficulties instead of burying your head in the sand. You could end up accumulating charges and fees you may not otherwise need to pay.