Can you be taken to court over a payday loan?

If you have taken out a payday loan and find yourself in a situation wherein you are not able to make repayments and find yourself defaulting on them, you may be concerned about what will happen next. One potential worry for borrowers concerns the possibility of being taken to court by a payday loan bad credit lender. However, is this, in fact, the reality if you don’t pay back a payday loan?

You won’t be taken to court over a payday loan

The simple truth is, is that a payday lender does not have the ability to take you to court over unmade payments. If you do receive letters from a payday lender that has tried to make letters look similar to court documents, this can be regarded as tantamount to harassment, and you could make a complaint about the company in question to the Financial Ombudsman Service.

What will happen if I don’t pay a payday loan back?


You should always make sure prior to getting a payday loan that you can afford to repay it back plus the interest too.

There are a series of different steps that a payday lender will take in order to rectify the situation and to retrieve the money that is outstanding. Before we go into detail about these steps, it is worth noting that if you are struggling to pay back the loan, you should always make it your first priority to contact the lender directly about it, as this can avoid them contacting you in the first place, and you may be able to come to a mutual agreement in terms of repaying that is far more manageable for you. The sooner the lender is aware of the financial difficulty you are in, the better it will be for you as the borrower.

The lender will attempt to collect payments

The first step will usually be for the lender to take is to try to take payments from your account after the initial date of payment. A number of attempts will be made for a certain period of time, and this is done through trying to debit the funds automatically from your bank account (this also includes not only the original amount, but the interest you have accumulated too, which it is important to never forget about as a borrower). This way of collecting payments is known as Continuous Payment Authority, and it is usually collected at 5 am on the day it is due.

If in the past you have asked the financial support of close family members or friends to help you pay off previous payday loan payments, you should keep in mind that depending on the payday loan lender you have received credit from, they may also contact these people too, in order to retrieve the outstanding balance. In some cases, if they have their financial information already, this money may be debited from their account instead.

The lender will make attempts to contact you

If multiple attempts have been made to debit the payday loan payment from your account has been unsuccessful, the payday lender will try to attempt to contact you. It is important to note that they can only do this a reasonable amount of times per day or week: hundreds of calls a week can constitute as harassment. Generally speaking, a lender may contact you a certain number of times per day or week, and this may be through phone calls, texts or by an email address that you have provided to them when you made an application for credit.

As previously mentioned, getting in contact with your payday loan lender if you are experiencing financial difficulties is important, especially for the reasons outlined above. You may find it more stressful to deal with the situation at hand if you are receiving these calls or texts but do not return them, making your situation only feel more overwhelming. Contacting your lender directly early on can prevent this from happening, meaning that you can possibly work out a suitable repayment strategy that works better for you, as well as potentially reduce the fines you could accrue if you were to not contact them.

You will pay daily interest on the unpaid loan


Due to the FCA takeover that occured in 2014, there are now price caps in place for payday loan lenders regarding how much they can charge for daily interest.

If you end up with a number of missed repayments on file for your payday loan, the lender has the right to charge you a daily amount of interest for each day that the balance is outstanding. Since the Financial Conduct Authority (FCA) took over from the Office of Fair Trading in 2014, price caps have been implemented to ensure that the amount of accrued interest on payday loans is limited. What this means for you, is that no payday loan company regulated by the FCA can charge you more than 0.8% per day when it comes to interest.  Within this price cap, the exact interest rate you will pay will depend on the lender in question, therefore you should always check the terms and conditions prior to making a payday loan application, so that you are aware of how much you will have to pay back for not only the original loan amount, but the daily interest too.

Furthermore, this is also why it is key to pay off the loan as soon as you can, in order to avoid having to pay back the interest you have accumulated for each and every day that the loan has not been repaid.

Default charge for the payday loan

If you are unable to keep to repayments on a payday loan, you will be expected to pay a one-off default charge by the payday loan lender. Once more, as a result of stricter regulations that are fairer to consumers, this default charge is capped at £15, as a way of avoiding consumers falling further into debt.

Daniel is a loans expert based in London and has been working in the payday loans industry since 2010.