Greg's Corner

Payday loan scams target the already vulnerable

By Greg Collier

Payday loan companies are already a shady type of business. They target low-income neighborhoods and hope to keep their customers on a never-ending cycle of dependence through their predatory practices. The high-interest rates and fees make it difficult for borrowers to repay the loan and can result in a cycle of debt. Several states have banned the practice of payday loans, but some lenders have gotten around these bans by opening storefronts on Native-American reservations. However, payday lenders are not the scammers we’re talking about today. We’re talking about scammers who take advantage of the borrowers, even after they’ve paid the loans back.

According to lifestyle blog Lifehacker, there are many scams that try to take advantage of borrowers. Most of these scams start when the payday lenders have a security breach. We can’t imagine such upstanding businesses having the best security practices when it comes to their customers. In one scam, the scammers will pose as the lending company and try to get the personal and financial information from the borrower under the promise of depositing the loan into the borrower’s bank accounts.

Another scam is where the scammers pose as debt collectors, hoping the borrower has maybe lost track of some debts owed to a payday lender. Since they typically have the borrower’s personal information, they can make the scam seem more legitimate. Considering how much information payday lenders collect from their customers, this can be an extensive amount of the borrower’s personal history.

There are also scams where the scammers will pose as payday lenders online and over the phone who either just want the victim’s information, or will ask for money upfront in exchange for a loan that never comes through.

The best way to avoid these scams is to avoid payday lenders altogether. However, we also understand that not everyone has that luxury. If you’re contacted by someone claiming to collect a debt on behalf of a payday lender, ask them for a written explanation of the debt. Debt collectors are required by law to provide that to debtors.

Also, if a lender asks for a fee in advance, they are a scammer. This is one of the variations of the advance fee scam is illegal for lenders to do.

Lastly, even payday lenders will not reach out to prospective customers by phone, email, or text. If someone is offering you a loan through this method, the odds are almost certain they’re a scammer.