Can a payday lender garnish my bank account or my wages if I don't repay the loan?

If you don’t repay your payday loan, the payday lender or a debt collector can generally sue to collect the money you owe. If they win, or if you do not dispute the lawsuit or claim, the court will enter an order or judgment against you for the amount of money you owe. The lender or collector can then get a garnishment order against you.

What is a garnishment?

If a court issues a judgment saying that you owe a debt, it could allow the creditor to garnish or take your wages or certain benefits to pay it off. Wage garnishment happens when your employer is served with a garnishment order and then holds back a legally required portion of your wages for your debts. Bank garnishment occurs when your bank or credit union is served with a garnishment order requiring them to withhold a certain amount for the payday lender or collector as allowed by your state law.

Each state has different procedures and exemptions from wage and bank garnishment. While almost all states permit wage garnishment, a few states don’t permit it for the collection of payday loan debt. Contact your state’s attorney general office for information about your state. Under federal law, certain benefits or payments, such as Social Security benefits, are generally exempt from garnishment.

Be aware that some payday lenders may threaten garnishment to get borrowers to pay, even though they do not have a court order or judgment. If this happens, you may want to seek legal assistance. Contact your state's regulator or attorney general office for more information. You may also contact a legal aid attorney or private attorney for assistance. You can also submit a complaint to the CFPB online or by calling (855) 411-2372.