Payday loan scams may seem like old news, but they’re more common than ever. In fact, in 2018, the FTC paid a total of $505 million to more than one million victims of payday loan scams. While the FTC is taking down payday loan sharks, they are still out there and still taking millions from their victims. Here are 6 ways to spot a payday loan scam and what they might look like.
In these scams, a “representative” of a collection agency who claims to be acting on behalf of a loan company tells victims they must pay their outstanding balance on a payday loan. Unfortunately, the caller is a scammer trying to rip them off or steal their identity.
In many payday loan scams, victims may have applied for a payday loan but have not yet completed it or submitted it but have not yet received the funds. In these scenarios, the victim has unknowingly applied for a loan with an illegitimate company, which proceeds to sell the victim’s information to a third party. This way, the caller can appear to be an authentic loan collector because they know lots of information about the victim.
While these scams usually target people who have filled out an application for a payday loan, they sometimes go after victims who haven’t done so or have not received the loan. You can’t be late paying back a loan you’ve never received.
Scammers often dishonestly align themselves with law enforcement agencies to coerce victims into cooperating. A legitimate loan company will never threaten you with immediate arrest.
If the caller actually represents a collection agency, they should have no problem identifying this agency by name. If they refuse to do so, you may be looking at a scam.
If callers named the agency they allegedly represent, but you’re still suspicious, do a Google search on the company. If you can’t find proof of the company’s existence or the search reveals evidence of previous scams, hang up!
Anyone representing a collection agency and attempting to collect an outstanding debt must send a validation letter to the debtor by law. This letter informs borrowers that they can dispute the debt within 30 days and specifies the amount of money owed and to whom they must pay it.
If you have not received any such letter in the mail, you’re probably looking at a scam.
When a “collector” insists you pay in total over the phone and refuses to furnish an address to which you can mail your payments, you’re likely talking to a scammer.
Now you know the 6 ways to spot a payday loan scam, do not become a victim. Warn your family and friends. Did you know that most credit unions offer payday loans? Low interest, no huge fees, no sharks. Elevate Credit Union Members with direct deposit can take advantage of our payday loans when things get a little too tight. Find out more about our Payday Loans here.