Every day there are more and more scams to worry about. Unfortunately, now you can add payday loan scams to the list. Most scammers’ main talent is in impersonation. So be extra suspicious of anyone calling and claiming to be a debt collector.
What are Payday Loan Scams?
According to Investopedia, a ‘Payday Loan’ is a sort of short-term borrowing where someone borrows a small sum of money at a very high interest rate. The borrower then agrees to pay the loan back, plus the interest fee at a later date – typically the borrower’s next payday. They differ from traditional personal loans in that they are calculated over days rather than years. They are also called check advance loans or cash advance loans.
This becomes a scam when scammers use information from valid loan applications and con their victims into believing that they represent their loan providers. They call the victim and claim to be attorneys for the loan company. They intimidate and often threaten their victims with jail time and this causes the victims to give them money.
Important Facts to Remember
- Failure to pay a loan does not warrant arrest. Actually, threatening to have an individual arrested because of failure to pay a loan is illegal. The main weapon these scammers use is intimidation. No one wants to be arrested – most people are willing to cooperate when threatened with arrest.
- Those most susceptible to payday loan scams are those who have applied for, or taken out, an online payday loan.
- The scammers will claim that you owe them thousands, but are willing to settle for payment of a few hundred dollars.
How to Protect Yourself from Payday Loan Scams
- Avoid applying for payday loans online because it is hard to tell if a site is legitimate or not.
- Don’t be intimated if a “debt collector” calls. Instead, inform them that you will not make any payment until you receive a detailed “validation notice” with information on how much you owe and to whom, as well as the collector’s information. It is a requirement by law. If they refuse, they are likely a scammer.
- Do not send money to an unknown caller who claims that you have to pay them a loan, even if you do owe money.
- Do not give out additional information about yourself.
- Go directly to your lender if you are unsure you owe them money. If there an outstanding balance, find out how much it is and if they’ve sent you to a debt collector.
- Be alert, and do not be convinced into sending money or providing sensitive information. Even if they try to scare you into paying your loan, you cannot be arrested. It is better to be safe and do your homework first than agree to things on the spot.
At Eastex Credit Union, we know that your financial health is very important. Why risk a payday loan scam? If you are having financial problems, opt for one of our loans instead. We’d love to meet with you at one of our locations and discuss starting you on a path to financial recovery. Contact us today!