Predatory payday loan companies and scammers thrive between inconsistent laws and stolen data

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.

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. A woman in St. Louis, Missouri, recently told BBB that she paid over $1,200 over the course of her $300 loan and still owes another $1,500.

Scammers also never missed an opportunity to take advantage of consumers. 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.

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.

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