How to avoid payday loan scam?
What is a payday loan, again?
A payday loan is a short-term, high-interest loan, generally, for $500 or less, that is typically due on your next payday. How do payday loans work? You typically write a check for the amount you are borrowing -- plus a fee. The lender gives you the cash and holds onto your check until your next payday. On that day, the lender cashes your check.
Read more: All you need to know about Payday Loans
Protecting yourself from a payday loan call scam and email fraud.
If you've ever been the victim of a payday loan scam, you know how frustrating and overwhelming it can be. You may have even felt like there was no way to protect yourself from these types of scams.
But there are things you can do to safeguard yourself from becoming a victim of a loan scam. Here are some tips:
- Never give out your personal or financial information to someone you don't know. This includes your social security number, bank account information, or credit card numbers.
- If you receive a call from someone claiming to be from a payday loan company, hang up immediately. These calls are often from scammers trying to get your personal information.
- If you are considering taking out a payday loan, research the lender thoroughly first. Make sure they are legitimate and have a good reputation.
- Never pay any upfront fees for a loan. Legitimate payday lenders will not ask for any money before giving you a loan.
- Be suspicious of any company that asks you to wire money or give them a prepaid debit card in order to get a loan. This is a common payday loan scam tactic.
By following these tips, you can help protect yourself from becoming a victim of a payday loan scam. If you have any suspicions that you are being scammed, contact your local law enforcement or the Consumer Financial Protection Bureau (cfpb).
Read more: How to stop payday loan harassment?
What is a payday loan collection scam?
A pay-day loan collection scam is when a scammer poses as a debt collector and tries to trick you into paying a fake debt. They may threaten you with legal action or say that you'll be arrested if you don't pay up. They might even give you a fake court document to make it look like they're legitimate.
These scammers are hoping that you're confused about payday loan debt and that you'll pay them to make it go away. But here's the thing: you don't actually owe this debt! Payday loans are illegal in many states, so you can't be sued or arrested for not paying one back.
If you get a call from someone claiming to be a payday loan debt collection agency, hang up immediately. Do not give them any personal information or money. And if you're worried that you might owe payday loan debt, contact your local consumer protection agency for help.
Red Flags of a Payday Loan Collections Scam
There are a few things that can help you spot a payday loan collections scam:
- The caller refuses to give you their name, date of birth, address, or phone number.
- They threaten to sue you or have you arrested if you don't pay up.
- They demand that you pay with a wire transfer or prepaid debit card.
- They give you a fake court document.
- They refuse to let you speak to a supervisor.
If you see any of these red flags, hang up immediately and do not give the caller any personal information or money. Remember, you cannot be sued or arrested for not paying back a payday loan. So don't let these scammers trick you into paying them!
Common Tactics of Payday Loan Scam
There are a few common tactics that scammers use when trying to trick people into paying fake payday loan debt:
- Posing as a debt collector: The scammer will pose as a loan collector and claim that you owe money for a payday loan. They may threaten to sue you or have you arrested if you don't pay up.
- Using fake court documents: The scammer may send you fake court documents that look real. They might even give you a fake case number or tell you that a warrant has been issued for your arrest.
- Asking for payment with a wire transfer or prepaid debit card: The scammer will ask you to pay the debt with a wire transfer or prepaid debit card. This is a common scam tactic because it's very difficult to get your money back once you've sent it.
- Refusing to let you speak to a supervisor: The scammer may refuse to let you speak to a supervisor when you ask. This is another red flag that should make you suspicious.
Check if Your Payday Loan Is Safe
If you're not sure if your payday loan is safe, there are a few things you can do to check:
- Contact your local consumer protection agency: You can find contact information for your local consumer protection agency on the website of the National Association of Attorneys General.
- Check with your state's attorney general: You can also check with your state's attorney general to see if the lender is licensed to operate in your state.
- Check the Better Business Bureau: You can check the Better Business Bureau's website to see if there have been any complaints filed against the lender.
If you're not sure if a payday loan is safe, it's always best to err on the side of caution and avoid it altogether. There are other, more reputable sources of financial assistance available if you need help.
Payday Loan Alternatives
If you're in need of financial assistance, there are other, more reputable sources of funding available:
- Small personal loans from a bank or credit union: These loans (personal loans) will typically have lower interest rates than payday loans.
- Title loans: These loans are secured by your vehicle, so they typically have lower interest rates than unsecured loans.
- Credit cards: You can use a credit card to get a cash advance, but you'll likely have to pay high-interest rates.
- Family and friends: You can always ask family and friends for financial assistance.
- Grants or loans from a government agency: You may be able to get grant money from the government to help with living expenses or other needs. You can also get low-interest loans from the government for things like starting a small business.
- Assistance from a nonprofit organization: There are many nonprofits that offer financial assistance to people in need. You can search for organizations that offer assistance in your area on the website of the National Association of Community Action Agencies.
- Charitable donations: You may be able to get financial assistance from a charitable organization. You can search for organizations that offer assistance in your area on the website of the National Council of Nonprofits.
- Credit counseling: If you're struggling to repay your debt, credit counseling can help you develop a repayment plan that works for you.
Short-term loans can be a dangerous and expensive form of borrowing. If you're considering one, make sure you understand the risks and alternatives first. There are other, more affordable sources of financial assistance available if you need help.
Stories from Debt Collection Scam Victims
"I was contacted by someone claiming to be from the 'Federal Trade Commission.' They said I owed money for a payday loan I had taken out. They threatened to sue me if I didn't pay up. I was terrified and ended up paying them $500."
"I got a call from someone saying I owed money for a payday loan. They had all my personal information and said I would be arrested if I didn't pay. I was really scared so I paid them $300. I later found out it was a scam."
"I received a call from a 'debt collector' who said I owed money for a payday loan. They threatened to sue me and garnish my wages if I didn't pay. I was so scared that I ended up paying them $1,000."
If you've been the victim of a debt collection scam, it's important to know that you're not alone. Thousands of people are scammed each year by fake debt collectors.
There are a few things you can do if you've been scammed:
- Report the scam to the Federal Trade Commission: You can file a complaint with the FTC online or by calling 1-877-FTC-HELP.
- Report the scam to your local police department: If you've been scammed out of money, you can file a police report.
- Contact your state attorney general: You can contact your state attorney general's office to file a complaint.
How to protect yourself from a payday loan scam
If you're considering borrowing a payday loan, it's important to be aware of the risks. These types of loans are expensive and can trap you in a cycle of debt. There are also a number of scams associated with payday loans.
Here are a few things you can do to protect yourself:
- Research the lender: Make sure you research the lender before you apply for a loan. Check with your state's attorney general to see if the lender is licensed to operate in your state. You can also check the Better Business Bureau's website to see if there have been any complaints filed against the lender.
- Read the fine print: Be sure to read all of the fine print before you apply for a loan. Pay attention to the interest rate and fees associated with the loan.
- Never pay an upfront fee: You should never have to pay an upfront fee to apply for a payday loan. If you're asked to pay a fee, it's likely a scam.
If you're considering taking out a payday loan, make sure you do your research and understand the risks involved. There are other, more affordable options available if you need financial assistance.