Can Payday Loans Garnish Wages?

Can payday loans garnish wages?Legal Notice: I am not a lawyer, and this article is in no way a form of legal advice. I am a former employee of a major, nationwide payday lender and I am writing from my experience about how we pursued those that didn’t pay.

If you’ve had someone garnish wages before, you know it’s one of the least pleasant experinces out there. You might think that because a payday loan revolves around your payday and verifies your employment that they can garnish your wages if you don’t pay.

However, they can’t, well technically they can, but they usually won’t. There are very few creditors out there that win these sort of judgements, including student loan companies, the government, child support, and the IRS. Payday lenders are just ordinary businesses, and they have to go through a whole lot in order to sue you. And in many cases they will just win a judgment, but will not be able to win a garnishment award.

If they sue you and win a judgment it doesn’t change much in your life, except that now on your credit report there will be a judgement on there as well. But you won’t be forced to pay on the judgement and you won’t have your pay docked.

Can Payday Loans Garnish Wages?

So while it’s possible that you will get sued by a payday lender, it’s highly unlikely that a judge would award them garnishment rights. It is possible, but a rare case indeed. In fact, suing you is the last thing they want to do, and they will only do it as the last resort if they can’t get a hold of you in any other way. That’s why it’s good to make some sort of contact with them, however sporadically, so they don’t put you in the file of potential lawsuits.

As long as you call them, and keep some form of communication open, they will consider your file still pending, and they will think that you have some intention of paying. If you don’t call or communicate in any form, they have no choice but to deem you worthy of suing, but even this can take many months or even up to a year to come to fruition. So at any time during that time you can try to square things up so you can clear this up and not worry about it any more.

Cost vs Benefit
You have to remember that payday loan companies deal with a lot of little debts like yours, and the the cost of going through the legal process outweighs how much they’ll get from you. They wouldn’t want to spend $1000 worth of man hours and court costs just to get your $600 back. In fact, they have a budget each year that allocates just how much money they’re going to write off as bad debt. It’s factored into all of their profit and loss equations, so they might try their hardest to get it from you with phone calls and even visits to your home, but as far as suing you and trying to win a judgement than says they can garnish your wages, they usually don’t take it that far.

Small Fish
Payday lenders have tons of customers in most cases, so they know that they will get most of their money back, plus all of the fees. Think of it this way. Let’s say one payday loan office has 300 customers a month and makes $150 in fees from each of them per month. They’re pulling in $45,000 a month and so your $600 or $700 loan isn’t looking so big any more. Sure, they’d love to get their money back, but they’re not going to chase you down to the ends of the earth to get it.

So don’t worry too much about it. Even though you put your paycheck up as collateral to get the loan, they will have a hard time touching your pay. If you do get sued by them, be sure to show up at the courthouse and plead your case, saying that you had every intention to pay it, but that because of the economy you haven’t been able to make ends meet. No judge would give them garnishment rights after that. You’ll lose the lawsuit since you signed the agreement, but you won’t garnish wages.

Can Payday Loans Garnish Wages?

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