Better Business Bureau of Southern Arizona is warning cash-strapped families to beware of some online payday lenders that claim they are not beholden to state or federal laws regarding licensing requirements, debt collection practices or caps on interest rates.
“Desperate times are leading people to the Internet to apply for payday loans and many are falling deeper into debt after getting tangled up with a lender who has zero regard for the law,” said Kim States, President and CEO of the Council of Better Business Bureaus. “Unlike a payday loan that you might get from a local business, online payday loans require your bank account number and, as a result, the borrower is at the mercy of the lender as more money than they counted on is withdrawn from his or her account.”
Hundreds of people, including at least one Tucson consumer, have complained to BBB after signing up for a payday loan on sites like OnceClickCash.com, 500Fastcash.com, rbtloans.com and Ameriloan.com. Complainants state that they agreed to what they believed was a one-time payday loan — typically a few hundred dollars to be paid off in two weeks. They supplied their bank account information to the lender and the money was promptly deposited.
The arrangement quickly turns into a debt spiral. Complainants state all of their subsequent payments went toward paying off recurring finance charges and never toward the principal. As a result, they report paying two and three times the amount of the original loan and still having the same amount of principal to pay off.
Sherry Hinojosa, of Tucson, told BBB she was forced to cancel her bank account after taking out a $300 loan with PDL Ventures, which operates multiple online payday lenders. The company, she said, continued to withdraw money from her account, even after she had thought the original loan was paid off.
“They virtually wouldn’t let me pay it off, and they wouldn’t tell me what my balance was,” Hinojosa said. “They just kept taking more money out each week.”
Eventually Hinojosa took her case to her bank and was able to place a “stop payment” on the reoccurring charges, but initially even that proved inadequate in preventing the company from gaining (more…)