We get allot of emails from borrowers who want to know if Payday Loan companies can garnish their paychecks. There is short answer and I’ll provide that now – yes and no, as long as you don’t give them the right to do it. Now that I’ve said that I will go into more detail on this assertion. A simple payday loan company has no rights given to them under law to garnish your paycheck, your checking account, or savings account. They can threaten you all they want on the phone or by mail, but they are not allowed by law to ever garnish one red cent from your accounts.

However, if you have signed the dotted line of a long (small print) contract agreeing to be a garnishee in case of defaulted payments, then it can happen. So the trick is to never use a payday lender who has this provision in their lending agreement.

To avoid this problem, simply read ALL of the lending agreement, and don’t borrow their money if the agreement states this. Now, even if you have signed on to be garnished in case of default, then it’s still not that easy for a payday loan company to go ahead and garnish your wages. They have to jump through allot of loopholes legally before they can start taking your money. Even if they do use the courts (and your signed contract and documents) to have your wages garnished, they can only garnish up to 25% of your earnings.

One thing for sure, and that is this. Don’t make it easy on them. Don’t cave in and start believing all of their rhetoric and threats. There is only so much they can legally do to you. For instance, many Payday Lenders will threaten you with jail time and tell you that you will be arrested TOMORROW. No you won’t be arrested, so don’t ever worry about that one.
Most payday lenders will actually cut their losses and sell their outstanding accounts to a private collection agency.

They’ll sell your defaulted account to a collection agency for pennies on the dollar, and recoup some of their losses. So if you owed them $5000 dollars, they would sell your account to the collection agency for something like $500, and then the collection company would “work on you”, with phone calls and snail mail trying to scare you into paying the some of the $5000 dollars. So if the collection agency gets $2000 dollars back from you over time, and they only paid $500 to assume your debt, they have made a profit of $1000. You are just a number my friend, so don’t take it personally.