Your cash reserves are running low. Holiday presents need to be bought and you don’t get paid until next week. What can you do to get some extra last minute cash?
Many cash-strapped consumers may find themselves in need of a small loan this holiday season. Payday lenders may seem like an easy way to get cash fast, but for most this ends up being a burden.
Your BBB warns you to research a company or website’s reputation before you give out your personal information or sign an agreement. Payday lenders target people whose credit may not be good enough to obtain a credit card or bank loan and who therefore rely on short-term loans to get by.
In 2013, BBB received more than 5,500 complaints nationwide against payday lenders. Many of those complaints allege fraud — including companies initiating loans or withdrawing money without permission, or calling to collect a debt that the consumer claims was never owed. Other complaints allege poor customer service or unscrupulous collection tactics.
Before you take out a loan, your BBB offers this advice for borrowers:
- Start with trust. Check out the company’s BBB Business Review to see its rating, history of complaints and other information.
- Never pay an upfront fee. Some short-term loan providers will ask for a post-dated check to cover the amount you borrowed plus interest and fees. However, if any lender asks for those fees in cash before giving you any money, walk away — especially if it’s an online lender asking for money via wire transfer. Charging upfront fees is illegal, and cash sent by wire cannot be traced.
- Limit the amount you borrow. Only borrow what you know you can pay off with your first paycheck. Most companies will allow you to “rollover” the balance for several weeks or months, but tack on fees the whole time. This can result in you owing several times what you borrowed in the first place.
- Know your rights. In Texas, payday lenders are required to disclose certain information before initiating a loan. That information includes the costs, how it compares to other loans and the interest rate if not paid in full. Members of the military enjoy even more protections, thanks to federal law.
- Read the fine print. Pay close attention to fees and consequences of non-payment. Will the company allow you to make arrangements if you cannot pay? How quickly will the company repossess your car?
- Keep your documentation. Many consumers said they started receiving calls from collections agencies years after they paid off a payday loan. Some of these calls were simple errors; others were attempts by scammers to collect a debt that is not owed. Protect yourself by having documentation that all loans were paid in full.
- Know where to turn. If you feel a lender has committed fraud or taken advantage, file a complaint with BBB, the FTC and the Texas Attorney General.