Payday Loan Debt in Houston, TX

Payday Loan Debt in Houston, TX

What is a payday loan?

Payday loans are small, short-term loans.  They often carry extremely high interest rates.  They are loans of last resort for people who need cash quickly.  As John Oliver notes in one of his Last Week Tonight programs, payday loan companies often use business names that imply quick access to cash.1

A quick loan for a small amount of money to be repaid with your next pay check sounds like a good idea.  But is it?

The problem is the cost of the loan.  With a 20% interest rate, it costs $100.00 to borrow $500.00.  Simplified, if you borrow $500.00 today to be paid on your next pay day, you will pay $600.00.  Many payday loans have interest rates much higher than 20%.

The problem is compounded if you can’t pay the full amount from your next pay check.  Sure, the company will work with you, but at a cost of more interest.  If you defer the payment, the next payment amount increases.  In the 20% example, the amount to be paid back would be $720.00 from the next pay check.

The amount of interest and fees from lenders varies, but the concept remains:  Payday loans are very expensive to the borrower.  The cost of repaying the loan increases quickly.

What should you do if you need a payday loan?

As John Oliver says, “Anything else.”  Get help from family, a friend, your church, your employer. Find part-time work.  Find a way to avoid payday loans. 

Can they arrest you if you do not pay back your loan?

The Texas Finance Code provides that a debt collector may not use threats, coercion, or attempts to coerce by, among other things, threatening that the debtor will be arrested for nonpayment of a consumer debt without proper court proceedings or threatening to file a criminal action against a debtor when the debtor has not violated a criminal law.2

Is it a crime to fail to pay your loan? 

For the usual payday loan, the answer is no.  Payday loans usually involve a promise to pay in the future. 

Sometimes, though, the lender requires that the borrower write a post-dated check for the loan payment.    

It is an offense in Texas for a person to issue a check if the person does not have sufficient funds in the bank to pay the check together with other checks outstanding.  The issuer is presumed to have knowledge of insufficient funds, except in the case of a post-dated check.3

Can a payday loan be discharged in bankruptcy?

In most cases, the answer is yes. 

A few conclusions:

  • If you do not have sufficient funds in the bank to cover a check, do not write a check.
  • Do not write or sign a check and leave it with a lender.
  • If someone asserts that you have issued a bad check, you must not ignore the problem.  If you receive a notice or subpoena, you should appear and/or seek the services of a lawyer.

An important note:

This article is intended to address small, short-term loans. 

Theft by check is a different and serious offense of obtaining goods or services with a bad check. The Harris County Texas District Attorney answers Frequently Asked Questions – Check Fraud at  http://app.dao.hctx.net/FAQs/4/Other_Divisions/5/Check_Fraud.aspx. 

The contents of this article provide general information, not legal advice of the Keeling Law Firm.  If you wish to schedule an appointment to discuss your consumer debt problem, please feel free to contact our office at 713-686-2222.  Keeling Law Firm is a debt relief firm.  We file Chapter 7 bankruptcies and Chapter 13 bankruptcy reorganizations on behalf of clients.  We are located in Harris County, Texas.  Ken Keeling is Board Certified in Consumer Bankruptcy Law by the Texas Board of Legal Specialization.


[1] John Oliver’s program may be viewed at here.   Caution – the language is coarse and not suitable to all.

[2] Texas Finance Code, Sect. 392.301.

[3] Texas Penal Code, Sect. 32.41.

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