How to Protect Yourself from Payday Loan Scams

How to Protect Yourself from Payday Loan Scams

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5 Min Read

Even if some of them have sky-high interest rates, payday loans are a type of short-term loan product that can help you cover urgent expenses. However, as a consumer and potential borrower, you must be aware of the scams that might come your way. One common scam we’ve seen recently is the payday loan call scams. So how do you protect yourself against this kind of practice in online lending? First, let’s talk about what is a call scam.

What is a Payday Loan Call Scam?

The loan call scam is a scam that has been around for quite some time. It is a phone call, usually from someone claiming to be an employee of your bank or credit union. They tell you there has been suspicious activity on your account and ask for your personal information.

According to the Better Business Bureau Serving Eastern Michigan, these calls are scammers looking for personal information such as social security numbers, checking account numbers, and other sensitive information. Once they have this financial information, they can use it to commit identity theft or other crimes against you.

Collection Scams Involving Non-Existent Payday Loans

According to the Federal Trade Commission (FTC) reports, many scammers call people and claim they have taken out payday loans with a certain company. The scammers then try to get personal information, including account numbers, by telling victims they must pay off old high-interest loans. Of course, the scammer won’t offer any proof that you actually owe money on a payday loan.

You should never give out your checking account number or other personal information over the phone unless you initiate contact with the payday loan company. If someone calls you about an old cash advance and asks for payment, just hang up.

How Does the Payday Loan Call Scam Work?

If you’ve received a call from someone claiming to be from your bank and asking for your bank account or credit card information, it’s a scam.

It’s called the “loan call scam” because it happens most frequently to people who have taken out payday loans. The scammers use tactics like pretending to be from the IRS and saying that if you don’t pay them back immediately, they’ll send the police after you or put a warrant out for your arrest.

The callers are often very convincing—and may even know some bank account information. They’ll sometimes even tell you to go online and look up your accounts, so you’ll believe what they’re saying is true!

These scammers are just trying to get into your bank account. However, if you give them any of your personal information (like passwords or credit card numbers), they might take money out of your account without even breaking into it!

how the payday loan call scam works

How Do I Know If I’m Being Scammed for a Payday Loan?

Whether you’re seeking short-term loans in person or online, there are some tell-tale signs that you might be being scammed.

Here are some signs that you might be getting scammed for a payday loan:

  • The payday lenders ask for your account information before they process your application.
  • The lender tells you there are no fees or interest until after the loan is approved (and then charges fees and interest).
  • The lender says they’ll waive any fees if you pay early (but still charges them).

How Do Scammers Get Your Information?

Unlike legitimate lenders, scammers are everywhere, and they know that you’re not always paying attention to the details.

That’s why they’ve developed so many ways to get your information without you even realizing it. Here are some of their favorite methods:

  • Phishing emails look like they come from reputable payday loan companies but actually contain links to malicious websites or attachments with viruses inside them. The emails might have subject lines like “Your Apple ID Has Been Locked” or “Your AOL Account Has Been Suspended.” Don’t click on those links! If you have questions about your account, call the company directly using a phone number in their official website’s contact section.
  • Malware is software that can infect your computer without you knowing it, often by clicking on a link or attachment in an email or web page. You’ll want to pay special attention to emails from unknown sources, especially if they ask for personal details like passwords or credit card numbers.
  • Social media impersonation happens when scammers create fake profiles on social media sites like Facebook or Instagram and pretend they’re someone else to trick you into giving them personal information such as passwords or credit card numbers.
  • Fake debt collectors call you and tell you that you must pay up immediately. Debt collection agencies are regulated by federal law, so there are a few ways to confirm whether the caller is a legitimate debt collector. A red flag for consumers in such scams is the failure or inability to provide written confirmation of the debt, but you can request a free copy of your credit report and see if this collection notice has shown up there as well.

How to Avoid Payday Loan Scams?

Payday loan scams are rampant. If you don’t want to get scammed and file a complaint with your state attorney general’s office, here’s how to avoid them:

  1. Callers claiming to be from a loan company who say they’ll waive the interest on your loan if you pay them now are probably scammers. A legitimate lender doesn’t ask for payments before they give you the money.
  2. If a caller asks for personal information like your social security number or driver’s license number, hang up immediately and report the call to the Federal Trade Commission (FTC). Scammers will use this information to steal your identity and open new credit accounts in your name.
  3. Don’t use suspicious wire transfers for sending or receiving money. Scammers use these popular methods because it’s easy to collect payment without being caught. Instead, go directly to a bank and withdraw from your account or use another secure online service.

Struggling to make ends meet and considering taking out a payday loan? Don’t fall victim to a potential scam.
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Edward Evans

Written by Edward Evans

Written by Edward Evans

Edward Evans is a money management expert and a freelance author of personal finance columns. He aims to provide accessible financial advice to improve financial literacy for average Americans and inspire them to take control of their personal finances and build wealth.