In Depth: Payday Loans and Offline Scams | Local News
As we move online, so do scammers.
But that doesn’t mean other types of scams are going away.
While the Better Business Bureau reports that phone scams have dropped 42% since 2015, the same data shows that text scams have grown from 11% to 30% in just 7 years.
SMS scams are also the method with the highest financial loss, costing consumers an average of $800.
“Many businesses use text messages to inform their customers, but so do scammers,” said Rebecca Barr, BBB’s communications manager. “They know we might get a text, we get a lot of it, so they’re making fewer phone calls and more texting. And probably because they can just put a link right in there, hoping you click on it. and it’s a phishing link that will take you to a fake website, hoping to capture your information, might also download malware, so while text messages are great for business, they’re also great for scammers.
According to an investigative study by the BBB, the latest culprit to join the scam ring is payday lending.
From 2019 to July 2022, the study finds that 3,000 payday loan scams were reported, resulting in a loss of $3 million.
The Federal Consumer Financial Protection Bureau describes payday loans as small, short-term loans, typically $500 or less, that are repaid quickly on the borrower’s next income.
When it comes to payday loan scams, it could be scammers pretending to be a lending company to get your information, or it could be a legitimate business taking advantage of it.
“During the pandemic and now with inflation, people turning to payday loans, it kind of created this perfect storm of predatory behavior to thrive on consumers,” Barr said. “So that means they could bury the fees in the fine print, they have triple digit interest rates. But it’s hard to know that because the interest rates aren’t APR – they’re only not on an annual basis due to the nature of payday loans – it’s short term.”
So all of a sudden, consumers are falling into a debt trap – seeing interest rates in the double or triple digits – more than the original amount they borrowed.
Barr said what makes payday loans even more confusing are the regulations and restrictions that vary from state to state.
“We have Idahoans contacting us concerned about the interest rates charged by these types of lenders,” said Rachelle Littau, consumer specialist with the Idaho Attorney General’s Consumer Protection Division. . “And unfortunately, there’s not much our office can do about that because there’s no law in Idaho that caps the amount of interest that can be charged on a payday loan.”
“We have people telling us the interest rate is 30, 40% on some of these loans.”
Littau said what Idahoans can do is contact the Idaho Department of Finance, which regulates these types of loans. And Littau said Idahoans should contact their lawmakers and let them know something needs to be done legally to regulate these loans.
The BBB and AG office said it’s important to ask questions, always read the fine print, and make sure you’re dealing with a reputable company.
“You want to deal with a reputable, licensed company when looking for a payday loan company,” says Barr. “Especially when looking online it can be even more confusing, so local will be better.”
Littau said when it comes to scam trends, they don’t necessarily see a consistent pattern. They go in waves and cycles.
“The scammers follow the news,” she said. “When COVID first hit there were a lot of scammers pushing fake cures and treatments. There were scammers pretending to be contract tracers so they follow these news cycles. Right now , I would definitely encourage people to be on the lookout for scammers related to student loan forgiveness because it’s a big topic in the news and scammers are watching it.”
While everyone is at risk, data shows that more and more young people are being scammed.
“Young people actually report losing money to scammers more often than older people,” Littau said. “However, when older people report losing money, the dollar amount is much higher than younger people.”
The AG’s office said its best advice for any scam is to watch out for the four Ps:
1. To pretend – scammers will always pretend to be a person or organization you know or know well
2. Problem or price – there will always be a problem they will try to get you help with or they will claim there is a prize at stake
3. Pressure – scammers want you to act fast
4. Pay – scammers will ask you to pay in very specific ways, such as gift cards or bank transfers
“We’ll often say if it sounds too good to be true, it probably is, but for scams, we’ll reverse that as well,” Littau said. “If it sounds too bad to be true, it probably is too. They’ll tell you your social security number has been tied to a crime and if you don’t pay right away, we’ll send someone to your house for you. stop. It sounds scary and like it’s too bad to be true – it probably is.”
More information on scams and BBB-rated companies can be found at bbb.org.
You can also find information or report online scams to the Idaho Division of Consumer Protection.