The Debt Cycle
Online payday loans present their own unique problems because it’s difficult to locate and regulate online lenders. Companies can anonymously create websites, and locate themselves where there are limited regulations on lenders. Some of these companies are located overseas, and often have no physical address making it challenging to contact them, resolve complaints, and enforce consumer rights. We have had some HELPS clients come to us with payday loans. Even when we have a physical address and can send notices to the payday loan lender they often ignore our contacts and harass the HELPS client. They do this because they know they cannot be sued because they move around too fast and are based overseas (even though it may appear they are in the U.S.).
Lenders hide not only their personal information, but facts about the loan, including the annual percentage rate (APR). It’s important to consider the APR instead of just the fee on the loan, because the creditor will attempt to force it to roll over. In fact many lenders will require you to decline to refinance or your loan renews automatically. They utilize the banks system of direct deposit/ withdrawal; the automatic renewing can go unhandled resulting in more debt.
There are ways
to defend against predatory online lenders. The easiest is to find
other borrowing options: legitimate overdraft protection, borrowing
from credit unions who offer safer alternatives, or from friends,
family, or a religious institution. If you are going to take out a
payday loan find one without an interest rate in the triple digits, avoid very short term loans (e.g. two weeks). Avoid sharing
personal information with unfamiliar companies; above all, do not
give your banking information to internet lenders. If you
do, it is possible you will have to change banks to stop them from
withdrawing from your account.
We strongly advise everyone to avoid or discontinue any use of payday loans.
For our clients:
If you continue to be harassed by a payday loan company, please advise us. We will take every step available to stop them. Resist the temptation to answer their calls or engage them in conversation. They often make false threats that scare people; including arrest and jail. It is best not to even speak with them.
To learn more about HELPS visit our website: http://www.helpsishere.org/
By Reese Tozier
