5 Ways to Spot a Payday Loan Scam
The payday loan industry is certainly no stranger to scandal. Payday lenders are constantly under fire for their interest rates, borrowing terms, and collections practices. A small minority of payday loan companies are guilty of something even more odious—scamming unsuspecting borrowers. Payday loan scams are particularly common on the Internet, which is not surprising considering anyone can set up a website claiming to be a payday lender. To avoid falling prey to one of these scams, you need to be aware of their telltale signs. Read on for a list of five classic signs of a payday loan scam.
- The lender wants money up front. Con artists lure borrowers to their sites by promising them obscenely large payday loans. They tell the borrower that a small deposit or down payment is required to qualify, and they ask for money up front, sometimes hundreds of dollars. A reputable lender will never ask you for money in advance, so don’t trust companies that do.
- The payday loan company’s site is not secured. The best payday lenders will have icons on their home page indicating that their site has been verified as secure by an objective party. One of the most common icons is the VeriSign Secured checkmark logo, which means the lender has obtained a VeriSign SSL certificate to improve security. The McAfee shield is also a good sign; it means that the lender’s site is secure enough to stop over 99.9% of hacker crime.
- The lender’s promises seem too good to be true. If you find a site where the lender makes sensational promises that no one else is offering, it’s probably a payday loan scam. Lenders that promise massive payday loans and/or the instantaneous delivery of funds are probably scamming you or, at the very least, lying to you.
- Your loan agreement is missing key information. Before the payday loan transaction can proceed, your lender will have to provide you with loan documents that you will need to sign. Federal law requires lenders to include the APR of the payday loan in bold on these papers. If this number is missing, the lender is violating the law and probably taking advantage of you as well. Also make sure your loan agreement tells you when the loan is due and how repayment works.
- The lender’s contact information is missing or fake. Your payday lender’s site should clearly indicate where the lender is physically located and how you can reach them. It’s a good idea to try to call the number listed on the site before you initiate the payday loan process. If the number is bad or no one picks up, you should find another payday company.