Online Payday Lenders Are Often ‘Fraudulent and Abusive,’ Study Finds
by Herb Weisbaum, Today
Going online to apply for a payday loan is convenient and confidential – but it’s also risky, according to a report by the Pew Charitable Trusts.
This first-ever national survey of payday loan borrowers found that a number of fraudulent, abusive and even illegal practices were often associated with these Internet lenders. The key findings:
* 32 percent of online customers report having an unauthorized withdrawal from their bank account
* 46 percent said the lender made a withdrawal that overdrew their checking account – twice the rate of those who borrowed from a payday loan store
* 30 percent said they were “threatened” in some way by the lender or a debt collector
* 39 percent discovered that their personal or financial information was sold to anothercompany without their knowledge
“Our report makes clear that abusive practices in the online payday loan market not only exist but are widespread,” said Nick Bourke, director of Pew’s small-dollar loans project.
Online payday loan companies have advertised aggressively in the last few years and it has paid off. Since 2006, revenue generated from these short-term loans tripled, topping $4 billion last year, the report noted.
As the industry has grown, so have the complaints.