HASTINGS, Neb. (KSNB) — Scammers are advancing their methods to target the bank accounts of hard-working Americans, and payday loans are the latest move. These types of loans are aimed at people who need a quick fix or something to make ends meet until their next payday.
The BBB says scammers posing as payday loan companies or debt collectors have affected more than 200,000 people, costing them about $4.1 million. Experts say victims usually feel that this is the only option available to them.
“What is really devastating about these scams is that they marginalize people. These are people who are typically desperate for money and have a very short time frame to work, so they’re willing to overlook a lot of the red flags that we mentioned in the fraud study,” said Josh Planos, vice president for Communications and Public Relations of the Better Business Bureau.
The playbook isn’t all that different from other types of scams, and payday loans have a broad cross-section; but they target a specific set of consumers.
“Typical middle age. Children and teenagers are not usually looking for payday loans, but it depends on the type of debt collection scam. We send out press releases about scholarships and educational debt all the time,” Planos said.
From 2019 to July 2022, BBB received nearly 3,000 customer complaints about payday loan companies with a disputed dollar amount of nearly $3 million. In addition, BBB has received more than 117,000 complaints against collection agencies. Complainants often indicated that they felt misinformed about the terms of their loans. Many fall into what consumer advocates call a “debt trap,” piling on interest and fees that can leave customers paying double the amount originally borrowed.
“They come to these places largely because they are desperate for a solution and have exhausted all other avenues. So what’s particularly notorious about this type of scam is that it targets people who are already on the fringes, who are out of luck anyway,” Planos said.
Consumers are urged to look for the signs before scammers catch them and put them in a compromising position.
“The reality is that your life may never be the same again. I hate to put it bluntly, but it’s really something that threatens your future purchasing power, your absolute creditworthiness, your ability to pay for anything.”
Federal regulators have enacted stricter laws to curb predatory lending, but those regulations have been reversed in recent years, allowing states to create their own rules for interest rate caps and other aspects of payday loans.
It varies from state to state so the process is different for people going to these payday loan companies.
The BBB has recommendations for regulators:
- Limit consumer credit to 36%
- Make more people aware of no-fee extended repayment plans
- Prompt lenders to check whether consumers can repay loans
- Encourage Zelle, Venmo, and other payment services to offer fraud refunds
Where to report a payday loan scam or make a complaint:
- Federal Trade Commission (FTC) – ReportFraud.ftc.gov
- Canadian Anti-Fraud Center (CAFC) – Online or by phone at 1-888-495-8501
- Prosecutors can often help. Check your attorney general’s website for information on whether you can file online.
- If you have an overdue payment on a payday loan, the Consumer Financial Protection Bureau may have resources to help you create a payment plan.
Experts say some victims of the scam are still struggling to pay bills and get food on the table. They also urge anyone who will be applying for a payday loan to ensure the company is accreditable.
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