Quick Cash with a Trap: How Payday Loans Can Ruin Lives

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WGN investigates

CHICAGO – For those who live paycheck to paycheck – or for anyone who really needs a loan to make it through until the next paycheck – a short term loan or payday loans like one. calls them, may seem like a lifeline. However, a WGN investigation found that those companies promising quick cash came with a big grab in crippling interest rates and hundreds of complaints to the Better Business Bureau.

If you look around, there are more payday loan companies than McDonalds. In 2017, Illinois borrowers took out over 200,000 payday loans totaling over $ 70 million. Every promise to get you money back – no credit, no problem.

The lure of easy money has grabbed a woman, whom WGN calls Jane. She was embarrassed to admit that she was financially desperate and believed that she had nowhere to turn for help. Jane has three payday loans.

“I thought it would help me catch up. but it looks like I’m falling further behind, ”she said. “And I don’t necessarily see a way out of this.”

Jane went online for her short term loans.

Steve Bernas, of the Better Business Bureau of Chicago, described online Internet lending as a bonkers game. One day they’re in business, another day they’re gone. He added that some companies rack up hundreds of complaints, get an “F” rating, change their name and resume operations.

“People are looking online for a way to get rid of their debt and they are looking for collateral. Secured money, secured loan, it seems so simple. They always say the people on the other line were very nice to me, it was great working with them. Of course, either they’re scamming you or they’re trying to take advantage of you in some way, ”he said.

Jane was scammed when a company contacted online to promise her a loan, but first wanted money to boost her credit rating.

“I ended up paying them $ 1,000 and they asked for more. I told them I couldn’t. Then they would charge a fee to cancel the request. I had already paid $ 1,000, I never got the loan, ”she said.

This should have set up a red flag, according to Bernas.

“This is the signal for the scam as we like to call it when they ask for an upfront fee. They have no money at all. They just prey on people who are looking for short term loans, ”he said.

Jane received a contract with 500Fast Cash. Her monthly payments are just over $ 1,000, but she will pay over $ 1,500 in interest. That’s a whopping 356% APR.

“Right now, after making payments of around 400 a month, I still owe around $ 1,500. It’s completely crazy, ”she said.

WGN Investigates called 500Fast Cash and asked to speak with its owner. Instead, we were directed to his web page. Incredibly, it took a strange turn. We were directed to an Indian tribe, the Modocs, in Oklahoma.

Additionally, a Netflix documentary “Dirty Money” traced the Indian tribe’s connection to a race car driver. Scott Tucker tried to hide behind the tribe to avoid state law, but it didn’t work.

Under federal law, the Federal Trade Commission sued 500Fast Cash and a large number of other Tucker companies for unfair payday lending practices. A judge fined the company nearly $ 1.3 billion.

Then came a criminal trial and Tucker was sentenced to 16 years in prison.

Two Indian tribes repaid $ 3 million for their part in the scam.

Yet the Modoc tribe is still functioning and Jane is still paying.

Payday loans are considered to be so problematic that the BBB will not accredit any of the companies that offer them.

“I’ve seen so many sad stories and it’s usually people who are short term that they just need a quick fix to get over a bump, get to payday. Again, this will not earn you payday. It’s going to put you in the poor house, ”Bernas said.

By law, the Illinois Department of Finance and Professional Regulation, which authorizes short-term loan companies, has sanctioned just 26 companies in the past five years. Consumer lenders appear to be targeting people who can least afford a loan, according to his records, with 61% earning less than $ 30,000 a year.

“At one point I thought I was going to take out a loan to pay off the other loan with higher interest, but it didn’t work out that way,” Jane said.

There are laws in the state to reduce the amount of money a borrower can get at one time. However, Bernas said based on the number of complaints the BBB receives, the laws don’t work.

Jane worries that she will never go into debt.

Seventeen states have banned payday loans, Illinois is not one of them. The BBB recommends that people seek a loan elsewhere, including asking family, friends, credit unions, or even your boss. The BBB recommends, if possible, setting aside a rainy day fund for emergencies.

For more information, visit the Consumer Credit Counseling Service.

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