CRIMINAL CAPITALI$M
'Predatory' payday loan scammers thrive with stolen data, BBB says. What to watch out for.


Katie Wedell, USA TODAY
Sun, September 4, 2022 

A new report from the Better Business Bureau warns consumers of numerous ways scammers have found a home within the shadows of the payday loan industry.

The report issued this week said that new frauds are often leveraging information stolen from legitimate lenders in order to defraud people.

Due to a boom in online payday lending companies in recent years, hackers are able to steal data and more easily imitate real lenders.

That makes it easier for them to offer fake loans, pressure people into believing they still owe money, pose as debt collectors or demand upfront payment for loans, said Josh Planos, vice president of communications and public relations for the BBB.

The study also highlights how uneven state laws have allowed predatory payday loan companies to continue to thrive.

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Payday loan scams to watch out for

The BBB report lists a few different scenarios that make up more 3,000 payday lender-related scam complaints received since 2019. Consumers have collectively lost millions to these scams, with the median amount lost per person in 2022 reaching $1,000.

Stolen information: If you've taken out a loan from a legitimate lender in the past, hackers could access your information and contact you posing as a representative of that company. Scammers will then try to convince people that they still owe money that in reality was already paid off.

Consumers should also watch for some signs that the company is an imposter, such as emails coming from gmail.com or yahoo.com addresses instead of the company name, or slight misspellings.

"If you get an email about a payday loan, check the info after the @ sign," the BBB report says. "Legitimate companies usually don’t send messages from a Gmail or Yahoo account. This is not a foolproof method, though, as scammers can spoof emails or even steal passwords to gain access to legitimate ones."

Posing as debt collectors: Fraudsters will use names that sound like law firms to convince consumers they are collecting a debt.

"A BBB investigation into BlackRock Legal Group found the supposed company sending mailers to people, saying they owed on a debt from Advance America, a real payday lending company. Advance America told the BBB that (it) has no dealings with BlackRock," the report says.

A red flag for consumers in debt collection scams is the failure or inability to provide written confirmation of the debt.

Under the Fair Debt Collection Protections Act enforced by the Federal Trade Commission, debt collectors are required to provide, in writing, the creditor’s name, the amount owed, how to get the name of the original creditor, and how to dispute the debt within 30 days of receiving the confirmation documents.

Asking for this information "really stops scammers in their tracks," Planos said.

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Asking for payment through apps or gift cards: Whether asking for an upfront fee or demanding a debt be repaid, scammers may request payment in a form that is nearly impossible to recoup, like gift cards, apps like Venmo or wire transfers from places like Western Union.

"Most legitimate operations are still on the cash, check and credit card plan for a reason," Planos said.

Asking for money to be returned immediately: A scammer might say they need to test your banking info by sending you a mobile deposit that you then need to send back immediately.

"The scammer is actually taking advantage of the payment approval system and there may not have been any money sent," the report says. "Eventually, the bank or service will reclaim that money, and the victim will have sent their own money to the fraudsters."

Some purchases or financial transactions may trigger a preauthorization hold on your account, but those are typically in the amount of $1 and will disappear automatically.

Consumers should not "return" deposited money to a sender, the BBB report says.

Any request for money upfront: Legitimate lenders will not ask for a fee or sum of money upfront to “guarantee” the loan, the BBB said.

The report includes the story of a BBB complainant named Shirley in San Jose, California:

"Shirley received a call from a woman who said her name was Lauren Green. Shirley had qualified for a $5,000 loan from the West Point Lenders. To get her loan, all she needed to do was pay $535 as a fee. After doing so, Shirley was told by Green that another $535 was needed because her credit was not good enough.

"Now out $1,070, Shirley began to get suspicious. It turns out that West Point Lenders is similarly named to other financial institutions, but is a fake company. Green attempted to get more money from Shirley, but she realized she had been scammed. The phone number the scammer called from is no longer working."

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No company will require an advance fee for a loan, according to the BBB.

Any fees and interest will either be taken out of the sum of the loan or charged to be repaid with the loan.

"If they ask for money to 'release the loan' or 'for bad credit' or 'for insurance' that’s a scam," according to the BBB report.

They call you with an offer: Shirley's story is also an example of scammers calling up out of the blue and offering a loan. Even if you've been searching for or applying for loans online, be wary of someone calling you.

If a company does make a loan offer via phone of online, do some research.

"Don’t succumb to high-pressure tactics, because any legitimate company will want your business, whether it is today or tomorrow," the BBB report warns. "If you can’t find any information, that is a red flag. Sometimes scammers have fake websites, so the presence of one is not a guarantee that you are safe."

The BBB's Scam Tracker website is a searchable database of reported scams, so running a company's name there is a good first step, Planos said.

The Better Business Bureau's Scam Tracker can help consumers search for company names that may be imposter payday lenders.

Predatory payday loan practices to watch out for

Companies that actually do offer payday loans aren't impervious to predatory or unscrupulous practices, despite an attempted crackdown by the Consumer Financial Protection Bureau under the Obama administration.

For the most part, states are left to regulate the industry and more than a dozen states introduced some type of payday lending legislation last year.

But payday loans are still available in 32 states, some of which do not have any cap on how high the interest rates can go. In fact, annual percentage rates in eight states can be above 400%, according to Pew Charitable Trusts.

The BBB warns some payday lenders will advertise their interest rates calculated on a weekly or biweekly bases, rather than giving the annual percentage rate typically advertised for credit card interest.

The report shows the math in which someone taking out a $375 loan with an advertised finance charge of 15%, is actually paying an APR of 391.07%.
How to report a scam

If you are the subject of fraud, there are avenues to report your case in addition to BBB.org/ScamTracker.

Federal Trade Commission (FTC): ReportFraud.ftc.gov

State attorneys general: Find your state attorney general’s website to see if you can file online.

Follow Katie Wedell on Twitter: @KatieWedell and Facebook: facebook.com/ByKatieWedell

This article originally appeared on USA TODAY: Payday loan scams to watch out for and how to protect yourself