Payday loans in the United States is an extremely predatory industry and now the landscape is deteriorating as scammers pose as popular Lenders try to scam people.
A new report from the Better business office on these scammers highlighted the story of Shirleywho “received a call from a woman saying her name was”Lauren Green.Lauren told Shirley that she “qualified for a $5,000 loan from West Point Lenders,” but that she “had to pay $535 as a fee‘ before the money was deposited into their account. Then Green said again: “Another $535 was needed due to bad credit.” However, after Shirley handed over the $1,070, Lauren disappeared with Shirley’s money, and when she did some research, She determined that the company was fake and that her information had been stolen.
Many scammers use names associated with major payday lenders in order to tarnish the notoriety of some of these companies. The BBB has warned that scammers posing as debt collectors can also use the same tactics to “make their threats sound more serious”.
How many payday loan scams have been reported this year?
While the total number of scams reported to the BBB has decreased, the amount deducted from scammers has increased over the years:
These numbers should be taken with caution as the BBB estimates this only about ten percent of fraud cases of this type are reported to the organization – which means that the extent of the Problem is much larger than what these numbers represent.
The federal government should take note of people’s willingness to pull off the scam, as many reported falling for it because “You were already in debt on payday loans.” After being scammed, some victims also reported: “months behind on rent and other bills due to the financial toll these scams took.”
A general warning for those interested in a payday loan
Payday lenders are one of the most unregulated aspects of financial services. The BBB reported that their scam trackers “that despite efforts across the country to curb the power of payday loan companies, many Americans are still trapped” in debt cycles after taking out one of these loans. These agencies use complicated formulas mask high interest rates applied to credits that can achieve more than four hundred percent. BBB researchers shared the story of Wanda, a Georgia senior who took out a $1,000 payday loan to build up her credit.
“Buried behind all the fees and paperwork, their real interest rate was nearly 450%. She soon regretted the decision‘ the report said, noting that these companies often take advantage of older people. “They charge you every two weeks and It adds up to around $400.00 to $600.00 per month to repay such a small amountt,” Wanda said in an interview with the report’s authors.