Posted by Maria Dimitrova

Read this if: You are in an urgent need of money and you are desperately searching for solutions

Gain: Important knowledge about prevention measures against a wide-spread scam practice with payday loans. Follow them so you don’t regret bitterly later.

One of the fastest growing scams in North America has been the payday loan scam. Payday loans are usually small, short-term, high-rate loans that have a variety of names including cash advance loans, payday loans, post-dated check loans, check advance loans, or deferred deposit check loans.

A huge number of people feel desperate because of the loss of a job, unpaid bills, etc and when a seemingly easy solution shows up, it’s tempting to go for it without even doing the necessary research. What is the price it eventually comes at?

Three types of scenarios

   *  A financial company offers individuals with bad credit history a loan. Often these loans are “guaranteed” no matter what the client’s credit history is, even if they have a bad credit or no credit they will get the loan. The only requirement is to pay an upfront “security deposit” for the loan because of their bad credit history. The problem is that the promised money never arrives in the client’s bank account and the security deposit is lost.

* A person has never applied for such loans but receive constant calls accusing them of not paying back a payday loan. The callers purport to be representatives of the FBI, Federal Legislative Department, various law firms, or other legitimate-sounding agencies. They claim to be collecting debts for companies such as United Cash Advance, U.S. Cash Advance, U.S. Cash Net, and other Internet check-cashing services. They relentlessly call the victim’s home, cell phone, and place of employment and try to pressure or threaten people into sending them money via MoneyGram or Western Union (because these are untraceable and irretrievable methods of transferring money.

    *   The payday loan company has really lent money to the client but he can’t pay it back on time due to the ridiculously high APR  – 500% or in some cases it can reach 1000%. People are being threatened with physical violence or jail if they don’t pay back on time.

Bad personal experience with payday loans

Take a look at the way people became scam victims:

“This company took my $3000.00. I was a desperate person looking for a loan after I got discharged from Bankruptcy and was suprised when this company called me and said I was approved for a loan. They did tell me I had to put up $2500.00 for insurance that would secure my loan. I was stupid enough to fall for it and now I am out $3000.00 and they are laughing at me. People out there do not have a heart and take people for their savings when they know the person is desperate.”

A lawyer shares a story of a scam victim he was trying to help that sounds both funny and sad as you see that some people don’t want to learn their life lessons:

“I tried to assist a lady from South Carolina who was victimized by a Toronto-based fraudster advertising in a local paper down there using the name “Wotson Whyat”. She was taken for $3,500 US that she gave as “security” for a $10,000 loan. When she called me, she wasn’t so concerned about getting back her $3,500 deposit, but she just wanted her $10,000 loan advanced to her. Unbelievable .These stories do not have happy endings.”

A possible solution offered:

“Hi I am a recent victim of the payday loan scams. I had 10 existing loans that were basically taking my paychecks away from me. I researched the net and found out there is a way out. I contacted legal-aid.org and talked to a lawyer about my situation. She informed me that you can close your account like I did and open a new one. I’m in NC and she told me that these loans are illegal here. The best advice that I can give is to contact legalaid.org there’s one in every state I believe and they can help you. Just contact legal aid and let them know about the high interest rates like I did and you too can be rid of these scams because she did a search for me and every loan I had was on the scam alert list. The best thing is that I don’t even have to pay these back but the law may be different in other states.”

How to avoid payday loan scams

Most importantly of all – make thorough efforts to find the money you need in other ways and avoid taking paydays loans but if you’ve decided to do it anyway, observe the following rules:

• Learn the specific laws in your state regarding payday loans. In many states they are illegal.

• Only use a registered company. Check with the Better Business Bureau, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation to see the company’s record. Type the name of the company into a search engine along with the word scam. The results may reveal a history you didn’t expect. Try to visit their office, if it is local.

• If the company wants a “security deposit” upfront, be sure it’s a scam as such practice is illegal.

• If they promise you a loan without checking your credit history or contacting your references, reject that offer.

• Check the terms and conditions before agreeing to them. Keep your eyes open for fees that are not disclosed clearly or hidden charges.

• Avoid lenders who ask you to wire money

• Check your bank, credit, and debit card statements regularly to make sure that there are no unauthorized transactions. If anything looks suspicious, contact your bank and all card issuers.

• Make sure that your browser is up-to-date and security patches have been applied

• Check the repayment process.

• Check the terms and conditions for extending the repayment time.

• Don’t ever give out personal information or agree to a loan over the phone or via the Internet (bank account information, SIN, date of birth).

What to do if you’ve already become a scam victim

• Don’t believe the caller that you’ll be arrested and put into jail. This has nothing to do with the laws in the US. Actually, collectors’ threatening or harassing behavior is not permitted according to Fair Debt Collection Practices Act.

• Contact your local law enforcement as soon as possible.

• Notify your state Attorney General and the FBI if the company was from another state or country.

• Inform the Better Business Bureau so that they can alert other consumers about the trap.

• Notify your banking institutions.

• File a complaint at www.IC3.gov .