Expert: Chris Ebert - 8/13/2009

Question
I received a payday loan for 500 dollars. I fell on hard times. The payday company is calling me stating they are going to sue me for 3200 hundred dollars. i never closed the account out. it just went into default because of overdraft fees. I do not want a criminal case on my record for  hot checks. i am going to school for accounting and getting my CPA. can they press charges on me. they stated they were filing the paper work with Harris county. what are the Texas payday loan collection laws and process.

Answer
Christian,

I have heard of similar tactics used by payday loan companies. Some things you should know:

1) The worst thing they can really do is to sue you or put a negative entry on your credit report.
If they sue, then you will need to answer to lawsuit and not ignore it.

2) I doubt the Harris County DA's office would collect on it since they require a physical check to be signed and delivered (almost in person) for them to collect. Nothing about this is a criminal matter from what you have said unless you knew when you took out the loan that you were never going to pay it back and they can prove this.

My general suggestion is to accumulate about 50% of what you owe them and start negotiating to settle the account. This sheet may help in that:

http://www.henleycreditlaw.com/pdf/DebtSettlementSheet.pdf

Good Luck.

Chris