Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.
BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.
While online payday loans are advertised heavily on the internet, consumers should be very, very wary of giving out their personal information on the internet. It may appear that you are giving your personal information to a lender, but oftentimes you are giving your personal information to a lead generator, who will then take your information and sell it to lenders, oftentimes to multiple lenders. Or, they may sell your information to companies who contact you and harass you to try and collect money for loans you never received, as the stories below demonstrate.
We will continue adding stories about the dangers of applying for online payday loans, so check back soon.
8. The owner of two online payday loan businesses that charged interest rates ranging from 89% to 169%, plus fees, will no longer be doing business in Pennsylvania. According to the state’s Department Banking and Securities in Harrisburg, Pa., the Anaheim, Calif.-based companies were not licensed by the state and made loans to more than 18,000 consumers for more than seven years. Pennsylvania Bans Online Payday Lender (Peter Strozniak, Credit Union Times. July 25 2014).
7. Many online payday loan companies will sell off the contact information provided when you got the loan. They will also sell off the lists of individuals who may not have repaid the loan, although the loan may have been illegal in the first place. This information then gets diffused among some of the most unethical, illiterate and inconsiderate scam artists on the planet, who will in the future start to phone or email the names on the list. Scams engender fear of legal consequences (E. Kent Winward, Standard Examiner. July 25, 2014)
6. Consumers say they were contacted after filing out loan applications online. Some of the applications were on Cash Advance USA or Fast Cash USA’s websites. Others say they filled out applications on sites that appeared unrelated. The victims say they were told to make upfront payments but never received their loans. Bogus payday loan offers siphon money from victims (Kimberly Essex, 48WAFF.com July 24, 2014)
5. Tiffany Kelker was stuck. In January 2011, finding herself in need of some financial assistance after the holidays, she had taken out a $600 “payday loan” from an online lending business that advertised fast cash. In the ensuing months, however, the Billings, Mont., mother of five watched as the company withdrew money electronically from her bank account, according to court documents. Eventually the lender took more than $1,800 in interest charges alone, which court records calculated as an annual percentage rate of 780 percent. Kelker would eventually file suit against Geneva Roth Ventures Inc., an Internet-based lending operation headquartered in Mission, Kan. Payday loan case showcases brutal interest rates in an industry under fire (Dugan Arnett, Kansas City Star, July 19, 2014)
4. “According to the complaint, the defendants used consumers’ personal financial information it had collected through its websites to withdraw $30 from the bank accounts of tens of thousands of consumers, without authorization and without providing anything of value in return. ‘These defendants deceived consumers to get their sensitive financial data and used it to take their money,’ said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. ‘The FTC will continue putting a stop to these kinds of illegal practices.’” Phony Payday Loan Brokers Settle FTC Charges (FTC Press Release, July 11, 2014)
3. “Many consumers in this case were victimized twice,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn’t owe any money.” At the FTC’s Request, Court Halts Collection of Allegedly Fake Payday Debts (Federal Trade Commission, July 1, 2014)
2. “The scammers use your personal information to hack your bank account and steal your identity. Remember, the information they purchase from the website lead generators includes names, addresses, phone numbers, social security numbers, bank account numbers, routing numbers, email addresses and even IP addresses. ” Payday loan pretender comes clean (Connie Thompson, KOMOnews.com, June 19, 2014)
1. “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis,” he told me. “That’s when the vultures come out.” I Applied For An Online Payday Loan. Here’s What Happened Next (Pam Fessler, NPR News, November 6, 2013)
CONSUMERS: Have you had a bad experience with an online payday loan? You should file a complaint with the Consumer Financial Protection Bureau. Not only will it likely help with your case, but you’ll be giving this agency important information as they design new rules to regulate payday lending this year. You can file a complaint with the CFPB here, and you can read about their work on payday lending, including enforcement actions here.
Action step: If you’re angry about what you read, consider signing our new petition to the Consumer Financial Protection Bureau, calling on Richard Cordray to implement strong consumer safeguards in the new rules they’re designing for payday loans. You can sign it here: CFPB Petition
To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, Google+, watch our movies on our YouTube Channel, sign up to receive our newsletter and action alerts, and of course, visit our website.