(WDHN) — Many people have lost their jobs and struggled to make ends meet during the COVID-19 pandemic, and more people have turned to payday loans.
Now, a Better Business Bureau study finds that uneven laws and stolen data allow payday loan companies and scammers to thrive.
Many borrowers faced with high interest rates and obscure fees from payday loan companies have also created an environment ripe for scammers, according to a new in-depth investigation from the Better Business Bureau.
Payday loan laws are managed from state to state in states where they are legal, and complicated regulations can make it difficult to track their impact in the United States and Canada.
However, the BBB study reveals that many of these loans, which already carry high interest rates, also carry hidden interest that is compounded weekly or monthly, rather than annually, as well as significant rollover fees.
From 2019 to July 2022, BBB received nearly 3,000 consumer complaints about a payday loan
companies, with a disputed dollar amount of nearly $3 million. More than 117,000 complaints have been filed against debt collection companies at the BBB.
Those who complain often say they feel misinformed about the terms of their loans. Many fall into what consumer advocates call a “debt trap” of racking up interest and fees that can force customers to pay double the amount originally borrowed.
In a statement, Better Business Bureau Serving Central and South Alabama President and CEO Carl Bates said, “The current landscape and entering into (a payday loan) in a hurry can make it difficult to navigate. . The Better Business Bureau advises anyone considering this type of loan to ensure they understand all fees and payment requirements before signing any documents.
BBB officials urge consumers to remember the following:
- Make sure you are familiar with the terms and conditions of a payday loan before signing on the dotted line.
- Know the other options available:
- See if you can get a bill payment plan
- Borrow from a credit union
- Find out about financial aid programs
- Talk to your friends and family
You can report a personal loan scam or file a complaint with several organizations:
Find more information about this study and other BBB scam studies at BBB.org/scamstudies