New Kentucky loan scam leaves borrowers in a lurch
Inside Subprime: May 31, 2018
By Kerry Reid
It’s always a good idea to approach payday loans with caution. And that becomes even more important when you’re dealing with online payday lenders.
A woman in Versailles, Kentucky, a town just outside Lexington, found that out the hard way earlier this month when a fake online lending company with a bogus Florida address scammed her out of $1,200.
As reported by WLEX-TV, the woman turned to online sources for quick cash when her poor credit history precluded obtaining loans locally. A web search turned up a company called “Money Loans Quick,” which claimed to be based out of Miami.
The victim, who was not named int he WLEX-TV article, was “approved” for a $3000 loan. The catch? She first had to pay out advance fees for things like “processing” and “bad credit insurance” in the form of Google Play gift cards. By the time she suspected a scam, she was out almost half of the original loan amount without a dime coming in.
The Better Business Bureau for Southeast Florida rated Quick Money Loans an F, after receiving two previous complaints about the company. Mail sent to the posted address was returned, because it goes to a “virtual” office building. In other words – nobody’s there.
Payday loans in Kentucky are legal, but the number of storefront operations has dwindled in recent years following new legislation regulating the industry. Since 2010, the state has required payday lenders to use Veritec, a database that flags suspicious transactions and tracks borrowers through their Social Security numbers, driver’s license number, address and other personal information.
Known as the “Kentucky Deferred Presentment Transaction System,” the program also aims to tighten licensing requirements for short-term lending businesses within the state. For consumers, information about what businesses are licensed, how to file a complaint and how to check the status of a payday loan is available on a website run by the state’s Department of Financial Institutions.
But that doesn’t help if borrowers go online, where lenders are much harder to track, license and regulate. Borrowers who have no other option for dealing with a short-term financial crisis should make sure to do their research before deciding on a lender, and the best thing they can do to protect themselves is to check the lender’s Better Business Bureau profile at 1-800-866-6668 or www.bbb.org to see if there are existing complaints about fraudulent activity.
Remember, it is illegal for any online lender to require fees upfront, and it is especially suspicious when they ask for those fees to be paid in the form of reloadable cash cards, such as Google Play, Amazon, etc. Scammers love those because they can use up the value quickly, and they’re difficult to track, making it impossible for borrowers to recoup any of the cash.
Even for those using in-state brick-and-mortar payday loan businesses, it’s important to be aware of the law. The nonprofit Legal Aid Network of Kentucky has an online fact sheet about payday lending. It dates from 2009, but the general advice is solid: use these loans only as a last resort and know upfront what the total costs – interest and fees – will run to. Under Kentucky law, lenders can charge no more than $15 per $100 in credits, and no borrower may take out more than two loans at a time with a total cap of $500. Payday lenders also cannot threaten criminal prosecution for borrowers who default.
To learn more about payday loans in the United States, check out these related pages and articles from OppLoans: