How to Fight Payday Loan Collection Scams

Scammers claiming to represent payday loan companies have been very active this year. State Attorney General offices across the country have ramped up their investigations and prosecutions of these scams. As I wrote in my last blog post, even folks who do not have an outstanding payday loan are being targeted.

But what can you do to fight back if you are victimized? First, contact local law enforcement. You pay taxes to support law enforcement efforts and they need all the help they can get to track down these criminals. Minnesota residents can start by reporting any suspicious calls or emails to the Minnesota Attorney General.

Second, if a scammer is calling you it's usually because they've stolen information from a private database containing information about payday loans. This means that you have been the victim of a form of identity theft. The FTC has information for what you can do when this happens to protect yourself. 

Third, do not give the scammers any more personal information. They will often use subtle tricks to try and pry details out of you about where you work or bank. You obviously should not give away any of this information. But before you hang up, you can ask the scammer to provide "written proof" of the debt in question. Federal collection laws require legitimate collectors to stop calling and to provide written documentation about the debt if you ask. You would be required to give them a current address to do this, but it is a way to determine with certainty whether the call is from a scammer. A legitimate collector would follow the rules and deliver the information. A scammer will not. If they push back against your request, you can let them know that you plan to report their violations to your State Attorney General and the FTC. This would probably convince them to cross you off of their list as a potential target.

Finally, if anyone calling threatens you, hang up and call the police. Even if you think you still may have a lingering payday loan out there somewhere, you cannot be put in jail or punished criminally for failing to pay a debt. Someone who threatens you with criminal sanctions for failing to pay a debt is not only misleading you, they may themselves be committing a crime.

About the author: Dan Cooke

Image credit: frankieleon

How to Recognize a Payday Loan Collection Scam

I'm hearing stories more and more often these days about payday loan collection scams. And it is unfortunately happening to people who have already paid off the loan or who have had it discharged in bankruptcy.

What happens is the scammer gets just enough information about a real payday loan debt to construct a threat. The scammer then sends an email or calls, relying on ignorance about how collection laws work, and playing on fears or guilt about exposure. They also often threaten "federal" or even "criminal" action.

These are almost always scams. But how can you be sure? If the email or the caller uses poor English, it is likely a scam. Read the email out loud. If it sounds like it was written by someone who barely understands English, you can safely assume it was written by a fake bill collector. If the call or email is threatening and mentions possible criminal actions, it's almost certainly a scam. If the email or caller says things about "suspending a social security number" it is definitely a scam. 

The more serious the threats and the more complicated the demands are, the more likely you are dealing with off-shore predators and not a genuine bill collector.

I would never reply to one of these emails. That only shows the the scam artist that you're a live target and will probably just convince them to send you more frightening and false emails. But you can test a collection caller by asking for a "written statement on the account" and ask that it be mailed to you. There are collection laws that require the lender to cooperate when you ask for a written statement on your bill. If the caller will not assist with this, you can safely assume that the call is an attempt to swindle you.

In my next post, I'll discuss how you can fight back if you've been victimized by a bill collection scammer. But for now, just be sure to understand that there are more and more of these scammers out there and not every collection call or email is legitimate.

About the author: Dan Cooke

Why Banks Love Payday Loans. And Why You Should Hate Them.

Most of us know that payday loans are a bad deal for the borrower but a new study by the Consumer Financial Protection Bureau (CFPB) shows that they're even worse than we thought.

Payday loans are short-term, high-interest loans where the borrower promises to repay the loan from the proceeds of a future paycheck. So when the next paycheck comes, you have to pay. Meaning that you are more likely to want to take out another payday loan to stay on top of your expenses. You get caught in a vicious circle.

It would be bad enough if you only had to pay back the amount you borrowed. But what really keeps you stuck is the incredibly high interest rates lenders are allowed to charge on payday loans. Fees of 15% on a two-week loan are common. These are the kind of rates you see mobsters charge in movies and on TV.

The CFPB study reviewed 12 million payday loans over a twelve-month period. The study found that more than 80% of payday loans are rolled over or renewed, even in States that have laws that try to restrict roll-overs. And the average payday loan borrower is likely to stay in debt for 11 months or longer, meaning they're paying far much more in fees than the amount of the original loan.

It's a debt trap. At least the big banks are cutting back on the practice. But smart borrowers will take heed and stay away from the payday lender.

About the author: Dan Cooke

Image credit: Gilbert Gibson