I have obtained a collection notice from a short term loan (internet) company. I have not been able to pay. Since my bank account has been frozen/cancelled; they mentioned that it was returned checks that caused the outstanding balance since you give them your bank information. Does not paying the balance which is $500 give them the right to inform local authorities (police), or does this matter only reflect on my credit report? Since they mentioned my bank I do not want to get arrested for bounced checks since the loan was transferred to me through my bank.

Thanks. This is in California