Payday installment loan consumers have been warned about online loan scams. The Consumer Federation of America (CFA) has been relentlessly reminding consumers of abusive practices of payday installment loan lenders and the high annual interest rates (APRs) of these loans that may reach as high as 650%.
Loan scams are not limited to frauds. They may also give misinformation to consumers by not disclosing valuable information associated with their loans and use other abusive lending practices. In short, abusive lenders are referred to as scammers because they mislead consumers by not informing them the true cost of their loan.
In a study conducted by the CFA, there are only 38 online payday installment loan lenders who willingly disclose their annual interest rates to their borrowers and there are 57 online lenders who also disclose their finance charges. The law requires, in accordance with the Fair Debt Collection Practices Act (FDCPA), that lenders fully disclose all costs associated with their loans.
Many victims of loan scams that have filed complaints with the Better Business Bureau have lost hundreds of dollars using payday installment loans. This year the BBB has received complaints about loan scams against approximatly 75 different lenders. Stephen A. Cox, President and CEO of the Council of Better Business Bureau said, “Scammers who prey on payday installment loan consumers are not new and they are flourishing in an economy when so many are struggling to get by. The complaints received by BBB are only the vocal few and we know from experience that many people across the country are falling for this loan scam every day.”
As long as lending standards are fully established, scammers will continue to take advantage of struggling and cash-strapped individuals. The BBB advises payday installment loan consumers about ways to recognize the red flags of a loan scam:
· The lender has a bad reputation or may not have one at all. To check this, key into a search toolbar the name of the lender and see if there are any complaints for fraud cases filed against them. You can also search on the BBB website to check for credibility. Trustworthy and reputable lending companies establish a good track record and value their reputation.
· The lender is not legally registered in your state to do business.
· If the lender asks you to wire money or to send a money order before receiving your loan or worse, wire money to another country, then beware. Victims of loan scams are often told they are approved for a payday installment loan in return for an upfront fee for insurance or collateral. But after they pay, they never get their loan.
· They have websites like Craigslist that look professional and often entice victims to fill out an online application form and provide bank account and Social Security numbers. But after a few weeks, they replace their name and use a fake business address.
If you have been a victim of these loans scams, you may contact your local Better Business Bureau and report to it to your police department. But if you are still planning to apply for a payday installment loan, take note of these red flags. As the famous line says, “Prevention is better than cure.”