Predatory payday loan companies and scammers thrive amid inconsistent laws and stolen data, new BBB study finds

As consumers lost jobs and struggled to make ends meet during the COVID-19 pandemic, many turned to payday loans and other short-term solutions, with online solutions proliferating. This not only allowed predatory lenders to thrive — many borrowers still grapple with sky-high interest rates and opaque fees — but also created a fertile environment for scammers, according to new in-depth research from the Better Business Bureau (BBB).

Payday loan laws operate state-by-state in the 32 states where they are available, and an intricate web of regulations makes it difficult to understand the industry’s impact in the US and Canada. However, the BBB study finds a common thread in the triple-digit interest rates many of these loans carry — cloaked by interest compounded weekly or monthly rather than annually, along with significant rollover fees.

From 2019 to July 2022, BBB received nearly 3,000 customer complaints about payday loan companies with a disputed dollar amount of nearly $3 million. In addition, BBB has received more than 117,000 complaints against collection agencies. Complainants often indicated that they felt misinformed about the terms of their loans. Many fall into what consumer advocates call a “debt trap,” piling on interest and fees that can leave customers paying double the amount originally borrowed.

Scammers didn’t miss an opportunity to take advantage of consumers either, as BBB Scam Tracker received more than 7,000 credit and collection fraud reports, resulting in a loss of approximately $4.1 million.

Impersonating payday loan companies and debt collectors, scammers arm themselves with stolen information to convince consumers to give up bank account information and cash. In one case, BBB found that hackers had stolen and released detailed personal and financial information from more than 200,000 consumers. News reports suggest this is not an isolated case.

Federal regulators have enacted stricter laws to curb predatory lending, but those regulations have been reversed in recent years, allowing states to create their own rules for interest rate caps and other aspects of payday loans. More than a dozen states passed laws regulating payday loans in the past year, but the landscape for legally operating payday loans remains patchy from state to state.

Currently, 18 states don’t allow payday loans, according to the Pew Charitable Trust. Additionally, the Military Lending Act sets a rate of 36% on certain payday loans. When it comes to fraudulent behavior, law enforcement agencies are limited in their ability to prosecute payday loan scams. Some legit payday lenders have attempted to prevent fraud by educating consumers on how to contact borrowers and how not to contact them.

The BBB study advises consumers to carefully research all of their borrowing options — as well as the terms of a payday loan — before signing anything to take out a short-term loan. The study also includes recommendations for regulators:

  • Limit consumer credit to 36%
  • Make more people aware of no-fee extended repayment plans
  • Prompt lenders to check whether consumers can repay loans
  • Encourage Zelle, Venmo, and other payment services to offer fraud refunds

Where to report a payday loan scam or make a complaint:

  • Federal Trade Commission (FTC) –
  • Prosecutors can often help. Check your attorney general’s website for information on whether you can file online.
  • If you have an overdue payment on a payday loan, the Consumer Financial Protection Bureau may have resources to help you create a payment plan.

For more information on this study and other studies on BBB fraud, visit

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