If you need a short-term loan, it may be tempting for payday lenders who operate the Internet to advertise. But before you click on an electronic link, the Federal Trade Commission (FTC), the national consumer protection agency, has a few words of prevention to tell you about it.
Lenders do not always follow the rules
Recently, the FTC sued several payday lenders who operate on the Internet for violating federal laws. The FTC alleges that lenders lied about the cost of their loans, asked borrowers to allow them to withdraw money automatically from their bank accounts, and threatened borrowers with suing or arresting them for non-payment.
Let’s see how it is presumed that this scam was developed: Payday loan providers who operate on the internet asked borrowers to give them information about their respective bank accounts in order to electronically deposit the borrowed funds and then extract them from the account the amount of repayment. The providers declared that the repayment amount would be equivalent to the sum borrowed plus the amount of a financial charge payable only once, and that this amount would be extracted on a particular date. Instead, the lenders made multiple withdrawals from the bank accounts of the borrowers and imposed a new financial charge each time. The result of this trick? The borrowers ended up paying for their loans a sum much higher than the declared cost.
A typical example to illustrate this scheme: A person borrowed $ 300 with a one-time financial charge set at $ 90. The borrower assumed that he would repay the loan through a single withdrawal of $ 390. But the lender began to make a series of automatic withdrawals, imposing a financial charge of $ 90 each time. At the time of the last extraction, to repay the loan the borrower would have paid $ 975 instead of $ 390.
In addition to the false statement alleged regarding the terms of the loan, the lenders also acted as debt collectors who fraudulently threatened the borrowers by suing them or arresting them.
Risks of sharing your personal information
Be careful when sharing your personal information. Even if your visit to an online site of a payday lender results in a loan or not, simply entering your information on the site may result in a problem. The sale of personal and financial information is a big business. The people who buy your information can use it to sell you products and services, charge for products and services that you did not buy or collect amounts other than those you authorized, or attempt to steal your identity.
Even if you do not click on the “submit” button to complete the transaction, your information can be captured by the keystroke log (“keystroke logging”) – a program that allows you to see and save everything you enter. in the application.
The loan aggregators
Unlike a direct lender who lends you money, a loan aggregator is an intermediary – a company that collects your personal and financial information in a loan application and looks for lenders who can offer you a loan.
Loan aggregators, also called contact generators, can – and do – sell information in loan applications, and potential borrowers may not even know it. The application may ask for your name, address, phone number, date of birth, Social Security number, your bank account or credit card number, annual income, and more.
How to find a loan
Payday loans can be expensive; There are other offers of credit that may have lower fees and costs. Before deciding to take a payday loan offered on the internet, it is important that you search and compare the available options. When comparing credit offers, check the reputation of credit providers on the internet or by consulting other sources.
- Look for the offer of credit that has the lowest cost. Before selecting a loan offer, try to find out what is the effective annual rate and the financial charge (which among other costs includes the charges and interest for the loan) of the different options. You have to look for the lowest effective annual rate. If you are searching the internet and can not find the effective annual rate and financial charge, visit the lenders in person.
- Consider taking a small loan in a credit union. It is possible that some banks offer short-term loans for small amounts at competitive rates. In the same way, it is possible for a local community organization to offer loans for small businesses. Another possibility could be to take a cash advance on a credit card, but this option may have a higher interest rate than other sources of money: before deciding to find out the terms.
- If you are having trouble making your payments, contact your creditors or your loan administrator as soon as possible, and ask for more time. If you act in good faith, it is possible that several creditors or lenders will be willing to try to find a solution. They may offer to extend the deadline for paying their bills: Find out how much they will charge you for that service. You may be charged a late payment fee, an additional finance charge, or a higher interest rate.
- Make a realistic budget, include your daily and monthly expenses, and plan, plan and do not stop planning. Try to avoid unnecessary purchases: everything adds up, up to the cost of things as insignificant as that rate of coffee that is bought every day. In parallel, try to collect some savings: deposit a little help a lot. Having a savings plan – even a modest one – can help you avoid having to borrow money to handle an emergency. For example, saving for six months the cost of a $ 300 payday loan can help you weave a safety net to cushion the blow of a monetary emergency.
- Find out if you have – or if your bank would offer you – overdraft protection on your checking account. If you are using most or all of your account funds regularly and you are mistaken in registering your account operations, overdraft protection can help protect you from additional credit problems. Find out the terms of the overdraft protection available to you – how much it costs and what it covers. There are some banks that offer protection against the denial of operations due to lack of funds that can be used to cover overdrafts or individual overdrafts caused by the issuance of checks or electronic withdrawals, but in general, a charge will apply. This option can be expensive, and may not always guarantee that the bank will pay the overdraft automatically.
Previously, this item was called fraudulent payday lenders who operate on the internet to take money out of your bank account over and over again.