To Payday or Not to Payday? (2 of 3) – Predatory Lending’s Second Act

To Payday or Not to Payday(1)

Every good drama needs a villain, but are these predators going too far?

Despite increasing regulation and public awareness of the predatory nature of payday loans, these storefronts are still out there, targeting the lower-income or under-banked consumers. But as lawmakers try to rein them in, the predatory lenders are adapting—and adopting different tactics so they can stay in the business of deception.

Here are three ways predatory payday lenders are changing their tactics to stay in the business of ripping borrowers off:

  1. A different name for the same bad product

Payday loans are predatory because of their low-dollar loan amounts, short terms (usually two weeks) and astronomically high interest rates (typically 400%!). As states and consumer agencies tighten regulations on these lenders (In New York, for example, payday loans are illegal), these payday predators are exploiting every loophole to get around it. The first trick is the simplest: They just change the name of their product.

In Ohio, one payday loan company registered their business not as a payday lender, but as a short-term mortgage company under the Mortgage Lending Act. Two weeks is a short term for a loan, but for a mortgage that’s just a blink. Obviously, the company was just trying to skirt the regulation that would have curtailed them if they had called themselves what they were: a payday lender.[1] Whether it’s a short-term mortgage, cash advance loan, salary loan or some other name, they’re the same thing and they’re always dangerous.

  1. They move from your paycheck to your tax refund

Just like the villains of stage and screen, predatory lenders are opportunistic: If they can’t get your paycheck, they’ll go after your tax refund check.

Beware the infamous Refund Anticipation Loans (or RALs).

RALs work the same way payday loans do: They’ll pay you now for your anticipated income (and charge you an unbelievably high rate—sometimes more than 700%). Predatory tax-preparers cut borrowers a check based on the amount of their anticipated tax refund, but they hide the incredibly high APR in complex contracts and use high-pressure sales tactics.[2] They’ll stress that they can get you your money now, but they won’t emphasize just how much of that money they’ll be taking for themselves.

RALs target the working poor, the disabled and senior citizens. Don’t let yourself be victimized.

  1. They go digital

There are more storefront payday lenders than McDonald’s and Starbucks locations in America. Really. But there’s another place where you can find even more of these guys: the internet. Brick-and-mortar storefront lenders are (hopefully) licensed in the state in which they’re operating. But with shady online payday lenders, there is often no telling. This means if you get caught in a cycle of debt, or find yourself otherwise victimized, you may not know where to turn or how to get help.[3] When evaluating online lenders, make sure you are dealing with a reputable organization accredited by the Better Business Bureau. Make sure they post their rates, terms and licenses clearly… like we do. And make sure they have great customer ratings… like we do (5.0/5.0 on Google).

OppLoans knows you deserve better than a payday lender. We provide our customers personal installment loans you can pay off over a longer, more comfortable timeframe. Your payments with us are fixed (meaning you’ll pay exactly the same amount each month), so there are never any surprises. Click “Apply Online” below to learn more today.

[1] Borchardt, Jackie. “Loophole for Payday Loans Upheld in Ohio Supreme Court.” Cleveland.com Accessed March 13, 2016.

[2] Wu, Chi Chi. “Another Year of Losses: High-Priced Refund Anticipation Loans Continue to Take a Chunk Out of Americans’ Tax Refunds.” ConsumerFed.org Accessed March 13, 2016.

[3]“What is the difference between an online payday lender and one with a storefront?”ConsumerFinance.gov Accessed March 13, 2016.

Blog Series: To Payday or Not to Payday
Part 1: Skipping the Drama of Payday Loans
Part 2: Predatory Lending’s Second Act
Part 3: The Final Act