Unfortunately, these types of news stories keep coming up. People who are down on their luck turn toward a company for help, and they end up losing the little that they already have. One of the latest is a business based in South Florida that claimed to help people find payday lenders that would be willing to give a loan. But what ended up happening is that the individuals would give out their personal information, and the company would not do anything to help them. Instead, they would deduct $30 from their checking account, and then ignore the consumer after that. You can read the whole story over on the FTC’s website.
If you have spent any time at all on PrimeRates, you will know that payday loans come up quite a bit. You will have read that there is fraud attached to them, scams, and that they are just not a good financial idea. What ends up happening is that those with poor credit, or no credit, turn to them for a boost at the end of the month (there’s just too much month left and not enough paycheck). The fees attached to these loans eat up so much of the money, that when it comes time to pay back the loan, the borrower needs another boost. And then they need another. Soon this short-term loan is dragged on for months, bringing the average loan duration up to around 5 months.
Fortunately, with this ruling, one more scam artist is off the streets. Unfortunately, this does nothing to help prevent people from getting stuck in the payday loan cycle. This particular business (which operated under 5 different online names) managed to rake in over $5 million. All charged in $30 increments. That means there are a lot of people out there looking for payday loans, and having trouble getting them. That also means there are a lot more people out there who simply go to a storefront loan location and sign away their paycheck.
For you the consumers there are lessons to be learned. The first step to not getting caught in a scam like this is to never give out your personal information to a company that you don’t know. Second, avoid payday loans at all costs (instead slash your expenses, pull some side jobs, and build up an emergency fund). Finally, keep in mind that the Consumer Financial Protection Bureau is out there watching your back. If you do get in trouble, head to their complaint page, or give them a call.
The bad news is that stories like these keep coming up. The good news is that stories like these keep coming up. Every time one is published, it means that one more fraudster is out of business. And more consumers are aware of the ever growing problem. Prevention is the best method to not losing money to the bad guys, so know what to look for. If there are any red flags at all, seek an outside opinion. Any legitimate business will give you time to look into things. If you are being pressured to make an immediate decision, call the whole thing off.