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The bills need to be paid and you don’t have enough money. A short-term payday loan may seem like the only option to get you past the crisis.
These days, payday loans are just a mouse click away. And some of the offers are mighty tempting: a “guaranteed” loan without a credit check.
Better watch out: This could be a set-up for a scam.
Because of the exorbitant interest rates, payday loans are never a good deal for the borrower, but using an unknown online payday loan store can be even worse.
According to the National Consumers League’s Fraud Center, scammers are creating bogus payday loan sites to snag their victims. These sites look completely legitimate. Some even have fake video testimonials to instill confidence.
After the application is completed, the soon-to-become victim is contacted by the scammer who has good news: The loan can be processed as soon as they wire money to cover the taxes or insurance or application fee. All of these fees are bogus and should never be paid.
“Unfortunately, the loan never appears and the consumer is left holding the bag,” said John Breyault, director of NCL’s Fraud Center. “Even worse, the victims are asked to send more and more money to collect the fictitious loan. These scammers are very good at stringing you along and putting the pressure on if you refuse to pay any more.”
The requests for payments normally continue until the victim catches on to the con or simply runs out of money.
Sade Wells of Philadelphia knows how convincing the bad guys can be. She needed money to move to a new apartment and applied for a $1,000 loan from an online payday loan store.
James Smith (you can bet that’s not his real name) called and told Wells she was approved for the loan once she wired the company $245. She did.
Smith called again. This time he told Wells the loan had to be insured before it could be transferred to her bank account. That would cost another $375. So she wired off the money.
By the time Wells pulled the plug on this scam, she had wired the company $1,600. In hindsight, she realizes this was foolish, but at the time Smith assured her she’d get the money back with the loan.
“I’m mad. I’m late on my rent and I can’t move now,” she told me. “I’m hoping and praying that I can get my money back.”
Unfortunately, that’s not likely to happen.
It isn’t easy to track down these online scammers. They’re very good at hiding. They use fake street addresses and anonymous IP addresses. They change names and locations to avoid law enforcement. They may even be operating from a foreign country.
Warning: This is not an isolated case. People across the country are being taken for large sums of money. They tell similar stories of being instructed to send payment after payment to get a loan that never came.
Other potential dangers
To apply for an online payday loan, you need to supply personal information, such as your bank account and Social Security number. Ask yourself, do you really want to give this sensitive information to an unknown company via the web? Fraud experts tell me it isn’t worth the risk.
“The offer of short-term, quick-approval loans could simply be a vehicle to gather personal identifying information from desperate consumers for no other purpose than identity theft,” said Adam Levin, chairman of IdentityTheft911.
And what will the company do with this information, even if it isn’t run by crooks?
“We see a huge number of websites that are designed not to originate loans, but to collect personal information and sell it to the highest bidder,” said Tom Feltner, director of financial services at the Consumer Federation of America. “We call them lead-generators rather than lenders.”
By giving out this information, you could wind up getting bombarded with more fraudulent offers.
Protect yourself
These tips from the National Consumers League will help you spot and avoid advance-fee loan scams:
- If you are asked to pay money to get money, it’s probably a scam.
While most legitimate payday lenders charge a hefty fee, this is generally assessed when you repay the loan. Requests for up-front fees before a loan can be granted are a sure sign that something is fishy. - If you’re asked to wire money or put money on a prepaid card before you can get a loan, it’s a scam.
Online payday loan scammers usually ask for fictitious “fees” to be wired via Western Union or Moneygram. These are bogus. In a new twist, scammers are also telling victims to load funds onto a prepaid card. Victims are then instructed to either send that card to the fake lender or provide the access code on the back of the card which gives the con artists access to all the money on that card. - Just because an online payday lender looks legitimate doesn’t mean it is.
Online payday loan scammers are experts at setting up legitimate-looking websites and providing official-looking documentation. If you’re not familiar with a company, don’t rely on these materials. Check with your state banking regulators, the Better Business Bureau, and your state’s corporation commission to make sure the business is legit.
If you’ve been approached by or lost money to an online payday loan scam, report it to NCL’s Fraud Center. This information will be forwarded to the appropriate law enforcement agency.
The bottom line
A payday loan should be your last option for getting some cash. If you truly have no other alternative, visit a brick-and-mortar store in your area. At least you know they’re regulated in some way by your state government. You also know where to find them if there’s a problem with your transaction.
Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.
More Info:
- Federal Trade Commission: Online Payday Lenders
- Federal Trade Commission: 6 Sure Signs of an Advance-Fee Loan Scam
Leave a Comment:
WOW, you really have to be a complete idiot to wire someone $1,600 for a $1,000 loan. Sounds like she is the kind of person made for this scam, and no matter how hard you try, you can't legislate stupidity! It seems if you had at least a part of your brain left that you would realize it was a scam before you went over the loan amount, but this genius apparently isn't quite that smart. Oh well, I guess I prefer the scammers go after the stupid ones, you know, kind of "thin the herd of the dumb ones".
A definite candidate for the 2013 Darwin Award
What gets me is that the scam targets people who are broke and probably have poor credit. Don't you have to be really broke to consider one of those places to begin with?
So, if I'm broke and desperate for $1K to pay my bills, how in the world do I come up with $1600 to wire to the scammers?
Maybe I could go to a friend: "Hey, can you loan me $1600 so I can qualify for this $1000 loan I really need?"
Man, that is one special kind of stupid. That person shouldn't be allowed out without their helmet on.
I don't even feel sorry for these "victims of scams" anymore. They are all idiots to fall for them in the first place. I was looking fo ran apartment online on craigslist. Found a great one for a great deal I asked to see the place, and i was promptly told that they were in africa on a mission statement and couldn't see the place until I wired them funds. If people fall for things like that then they are all fools that will soon be parting with their money. Heres a hint, if someone asks you to send them money, think about it for a second and don't be a fool.
Nevada- you would think that a payday loan would be the last resort for these people but they are too stupid to get it. I don't think they even know it's they are getting ripped off.
10% of the US population has an IQ of 80 or less. I'd guess that a large percentage of people that use payday loans are in that 10%. Pretty easy picking for the scammers. "A fool and his money are soon parted"
Of course even the 'legit' payday loan places are a complete ripoff. The People that keep them in business lose a lot more than $1600 over time.
Even well educated people can fall for scams. How many people have clicked on a hoax website and downloaded viruses to their computers?
You can educate someone with an IQ of 80, it doesn't make them bright, and the average IQ is 80. Not 10%.
No, by definition the average IQ is 100, not 80.
This lady reminds me of the woman who called the cops to report her dope dealer ripping her off when she tried to buy heroin.
She wanted the cops to get her dope or bring her money back to her.
The average IQ is 80 ?
A diagnosis of mental retardation is in part based on the results of IQ testing. Borderline intellectual functioning is a categorization where a person has below average cognitive ability (an IQ of 71–85), but the deficit is not as severe as mental retardation (70 or below).
If it help you feel better then I guess it's ok.
The average IQ is 100. 50% of people receive this score. Mensa members are in the 98th percentile, which on many IQ tests is above 130. "Ask Marilyn" columnist Marilyn vos Savant is said to have the highest measured IQ of 190+. Einstien is believed to have an estimated IQ of between 160 and 180. IQ scores varys depending on the test.
Actually poor people are the ones that fall for it. Most people could care less about money and how to make it they are too busy with the supper bowl. You ask some people who won the supper bowl 30 years ago they can tell you and the score but they cant tell you what their 401K is invested in and what that investments history and what that investment is investing in.
Yes it is easy but if your greedy you get easily scammed now greed does not have to me money it can also be about time also. it is the number one reason ponzi products get so much money.
90 to 110 is considered 'average' for IQ...
www.iqcomparisonsite.com/iqbasics.aspx -
Tip of the Day:
Borrowing money means that the lender is supposed to send YOU money, not vice versa.
Do you suppose that this person's lack of financial common sense is what precipitated her financial crisis in the first place?
Duh, are you sure? Dern...I got gypped again yep I did yep I did.
No the lender makes money from you and your in patience.
You can't fix stupid.
True!!!, but there is always a politician (or a lawyer) willing to try :)
I'm still laughing. What were you thinking!!!!!
Me too LOL....
Every time I think humans couldn't get any more stupid, someone proves me wrong.
Why would anyone want to steal the identity of a person who has no money and probably has questionable credit? Isn't the idea to take advantage of a the victim's good name?
It seems like they're just stealing the money and not identities.
Why would you comment without reading the article.
lmao...you really can't fix stupid...good thing there are people like her to take advantage of or they may try picking on one of us
All the scammers, when caught should be lined up and shot.
The most amazing thing is that there is a link to such an online loan company right in the story, in a paragraph with the heading "Warning". It's attached to the words 'to get a loan'.
Talk about a mixed message!
Scammers should be prosecuted to the fullest extent of the law.
However, to say that payday loans are "never a good deal"? False. They are a good deal when the consumer knows the terms, makes an informed decision, and feels it is right FOR THEM. They are better than utility reconnect fees or overdraft fees. Some people don't want to borrow from a friend or employer and don't have a credit card or something to pawn.
I hate it when some elitist tells me what is or isn't good for me. 12 million Americans use payday loans. They ain't stupid, even though I'm sure many would like to believe they are.
The article said it's a last resort, and it is. The interest rates are outrageous, so it's usually a terrible option. So are high interest credit cards. It isn't GOOD for anyone (other than the lender), but may be the best of all options. It's never good to pay high interest, whether you're rich or poor - but much worse if you're poor.
I have a company I use from time to time because I realized that it is way cheaper than many of the other options. It's good to know that I have an option in case of an emergency.
From the time I was just a little girl, my father always told me, "Annie, if it sounds too good to be true, it probably is." That little piece of advice has literally saved me from EVER being scammed by anyone---and I've come close a couple of times, but his voice in my head always reminded me not to go further.
i'll take it further, it's never probably, it's ALWAYS is.
Why is it people always forget..
If it sounds to good to be true it is..
And wth.. She had no money for rent so she needed 1000 bucks.. but she could afford to wire 1600?..
That was my question!
Would she also fall for: 'I'm royalty from Nigeria. Please send me your bank info so i can deposit a million bucks.'
people in Uganda have to eat too
I don't know,, I've had pretty good success with the on line company I've been using,, they charge me around $250. on a $1550. loan and the bills are getting paid,,
my real fear is if congress decides to withhold my VA disability benefits I'm totally screwed,,,,
sammy rock - You're on some slippery ice there! I once had "good success" with an online company for a much smaller loan that ended up costing me at least four times the amount of the original loan. Their interest rates are disgusting, at best. It got so bad I had to close my bank account since they didn't stop with the withdrawals - even when I paid for 'stop payment' on my account.
The bigger concern I see is the fact you're on VA disability AND using payday loans. I don't know your circumstances or VA rating but I've known several disabled vets whose ratings were reduced OR taken away all together if they didn't follow up with eligibility appointments when requested. NEVER miss these appts.!
I can't state this strongly enough: Pay off that loan and DON'T get another one! As a matter of fact, there are some places where these pay day loan offices located next to military bases (Camp Pendleton, for one) are no longer allowed to make loans to active military. It was becoming such a big problem when a payment was missed and the loan company would put a wage assignment on their military pay (creating more work for the payroll officers due to the large volume of loans going to default). Your 'loan' payment for $250, how much will you have paid back when it's all said and done? Is it 10 or 12 months? Good luck!
Even if it's a legit loan, the interest rates are astronomical! I looked into one just for fun since you never know if/when you'll need some quick money. The interest rate worked out to being almost 300%!
Legal robbery, gotta love it.
"The fool and his money will soon part ways"
And there is no shortage of less than immoral dirtbags to help you do it. You can count on it.
If you think you can educate the fools, think again.... as sorry as I am reading this story, they're not the kind who read and learn from mistakes. Tragic indeed.
I am probably in the minority here and I don't know if I can name names. I have at times needed short term loans and I have never had a problem with Ameriloans or Cash Central. Ameriloans is better if you need a few months..Cash Central is really for a two week loan, I think the interest rate 15 per hundred is not so out of sight if you are stuck. They never ask for money up front, but you do have to pay it back on time. Those of us using these sources would be laughed out of a bank and if you are trying to keep a roof over your and your 18 year old cat it helps.
"18 year old cat"? don't you think it's time he either gets a job or moves out if finances are that tight?
Meet2x4again, In many states laws require the payday loan places to quote an API for their loans. An API is completely meaningless for a two-week loan. The interest is high, but not that high. Imagine if banks had to quote an API when they charge $35 for being overdrawn 1$.
Loan sharks have gone legit and scammers are making money. The world works the way the world works. To double your money fold it in half and put it in your pocket.
These payday loan scammers are almost as bad as the IRS.
All online payday lending should be banned. It's a way for scam companies to get your information and give it to the next person.
I can't believe there is an idiot out there that would apply for one. Of course, if there were no gullible people, the scammers would be out of business.
They say a drowning person will grab at anything, and sometimes I wonder if it's not so much a matter of stupidity as desperation. Except for the woman who sent $1600 to get $1000 (I'm still trying to wrap my head around THAT one), I wonder how many people think they can get the financial help they need by putting a token amount up front. If the scumbag rep tells them what they want to hear, maybe it's just enough to get them believing they'll get relief...
"legitimate payday lender" is an oxymoron.
Some credit unions offer short term loans to their members. If your finances are tight enough that you occasionally have to turn to payday loans, check with your local credit unions to see if you would be better off opening an account with them.
For example, one credit union loans up to $500 for 30 days at an annual interest rate of 18% (compared to payday loan companies which often charge closer to 600% annual interest rates)
Here is an article about credit unions offering alternatives to payday loans: http://www.creditunionsonline.com/news/2011/credit-unions-alternative-to-payday-lending-provides-financial-relief-education.html
Fees and minimum account balances are also often more reasonable at credit unions. Once you start banking with a credit union, you'll probably never want to go back to a commercial bank.