I have said on numerous occasions, and have written in previous issues, that payday loans are bad news for working folks. A short-term payday loan may seem like the only option to get a family past a financial crisis, but such loans only add to their pain. Unfortunately, payday loans, for folks with computers, have become just a “mouse click” away. And some of the offers online are mighty tempting. For example, a “guaranteed” loan “without a credit check,” may be offered. Better watch out for those – that could be a set-up for a scam.
Because of the exorbitant interest rates, payday loans are never a good deal for the borrower. But using an unknown online payday loan store can be even worse for a working man or woman who needs money and quickly. According to the National Consumers League’s Fraud Center, scammers are creating bogus payday loan sites to snag their victims. These sites look completely legitimate, and some even have fake video testimonials to instill confidence. After the application is completed, the soon-to-become victim is contacted by the scammer who has good news. The scammer will say the loan can be processed as soon as the borrower wires money to cover the taxes or insurance or application fee. All of these fees are bogus and should never be paid. John Breyault, director of NCL’s Fraud Center, says:
Unfortunately, the loan never appears and the consumer is left holding the bag. Even worse, the victims are asked to send more and more money to collect the fictitious loan. These scammers are very good at stringing you along and putting the pressure on if you refuse to pay any more.
The requests for payments normally continue until the victim catches on to the con or simply runs out of money. Our readers shouldn’t be too surprised to hear that it isn’t easy to track down these online scammers. They are very good at hiding. They use fake street addresses and anonymous IP addresses and will change names and locations to avoid law enforcement. They may even be operating from a foreign country. Many likely are doing so.
Unfortunately, folks across the country are being taken for large sums of money by the scammers. They tell similar stories of being instructed to send payment after payment to get a loan that never came. To apply for an online payday loan, the borrower has to supply personal information, such as bank account and Social Security number. That should never be done. Ask yourself, do you really want to give this sensitive information to an unknown company by way of the web? Fraud experts all say it is never worth the risk. Adam Levin, chairman of IdentityTheft911, says:
The offer of short-term, quick-approval loans could simply be a vehicle to gather personal identifying information from desperate consumers for no other purpose than identity theft.
Even if the company isn’t run by crooks and scammers, they can still use this information. Tom Feltner, director of financial services at the Consumer Federation of America, says:
We see a huge number of websites that are designed not to originate loans, but to collect personal information and sell it to the highest bidder. We call them lead-generators rather than lenders.
By giving out your personal information, you could wind up getting bombarded with more fraudulent offers. These tips from the National Consumers League will help folks spot and avoid advance-fee loan scams:
• If you are asked to pay money to get money, it’s probably a scam. While most legitimate payday lenders charge a hefty fee, this is generally assessed when you repay the loan. Requests for up-front fees before a loan can be granted are a sure sign that something is fishy. If you are asked to wire money or put money on a prepaid card before you can get a loan, it’s a scam.
• Online payday loan scammers usually ask for fictitious “fees” to be wired via Western Union or Moneygram. These are always bogus.
• In a new twist, scammers are also telling victims to load funds onto a prepaid card. Victims are then instructed to either send that card to the fake lender or provide the access code on the back of the card which gives the con artists access to all the money on that card.
• Just because an online payday lender looks legitimate doesn’t mean it is. Online payday loan scammers are experts at setting up legitimate-looking websites and providing official-looking documentation.
• If you are not familiar with a company, never rely on these materials. Check with your state banking regulators, the Better Business Bureau, and your state’s corporation commission to make sure the business is legit.
If you or a family member or friend have been approached by or lost money to an online payday loan scam, report it to NCL’s Fraud Center. This information will be forwarded to the appropriate law enforcement agency. A payday loan should be your last option for getting some cash. If you truly have no other alternative, visit a brick-and-mortar store in your area. Hopefully, they are at least regulated in some way by your state government. But in most states that regulate payday lenders, the regulation is fairly week. You also know where to find them if there’s a problem with your transaction.
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