No one wants to be in a situation where they need a payday loan. These loans are short-term with extraordinarily high interest rates, but have been gaining popularity over the last decade. Unfortunately, so have the scams.
Payday loans should NOT involve up-front fees or recurring fees. These are both signs of a scam. We’d like to take some time to share a real-life story and what you can do to protect yourself.
ABC News posted a payday loan scam story from Kevin Whitney. Kevin needed a payday loan and the company he found asked for a $195 fee to secure the loan. The company also said they needed to do this transaction on a Green Dot MoneyPak card for compliance reasons. Kevin provided the money, only to get a call that they needed him to cover another fee.
At this point, Kevin was suspicious and asked for a refund on the $195. The company threatened to sue him for the loan balance – a loan he hadn’t even received yet. Now aware that it was a scam, Kevin hung up and closed his bank account to prevent fraudulent charges.
The Red Flags
The main warning in this story was the up-front fee. Loans may include fees, but they will be included in the loan balance and not paid before the funds are distributed.
Green Dot MoneyPak cards are also not a safe way to do these transactions. They’re convenient, like gift cards, but they offer no protection at all.
Finally, a legitimate lending company will not make legal threats over the phone. Many payday loan scams also involve these companies calling and harassing people for payment – something that Kevin might soon experience. If anything is owed, written documentation must be provided.
Here’s what you can do to avoid becoming a victim of this or any other scam:
- Do not give away any personal information until you’ve done your research. You can Google company names and telephone numbers to check for complaints.
- Be on the lookout for the red flags mentioned above.
- Read the fine print for anything you’re purchasing.
- Check your account regularly for unauthorized charges.
Please remember to contact our Loan Experts first to help with your lending needs. We’d also be happy to provide advice on programs like payday loans. You can reach our experts at 855.MY CU LOAN (855.692.8562).