BBB warns people of payday loan scammers

DOTHAN, Ala. (WTVY) - The COVID-19 pandemic, job loss, and inflation has forced many people to turn to payday loans and lending when in a pinch to makes ends meet. But, at times, with those comes scams and predatory lending.

The Better Business Bureau recently conducted a study regarding this, and found more people are turning to these options to get by, and they warn consumers of scammers.

“What’s going on the past couple of years just kind of added gasoline to that fire,” Alex Derencz, Communications Manager BBB Serving Central & South Alabama, said. “Again a lot of folks have found themselves in tough situations.”

Derencz said each of these factors are putting people in a tough spot financially who are looking toward getting a payday loan for a short-term solution.

“One of the findings was that many folks are getting into these payday loans and they’re falling into their consumer “debt trap,” Derencz said.

Payday loans are nothing new, and Derencz said they aren’t always a quick fix. He said it is crucial for people to understand the numbers behind loans to avoid getting caught in a worse financial spot than they originally started with.

“Say you needed to get out 300 dollars to cover your rent, well come two weeks later you’re still unable to pay, more money is going to get tact on, more interest will get tact on, and you know by the end of that month that 300 dollars is going to be well upwards of 400 dollars,” Derencz said. “So, you can fall into a deeper hole than when you started.”

Another thing to be mindful of: scams. The payday loan market has legitimate options, but there are also scammers.

“Scammers, one of the things they take advantage of is they thrive in times of need,” Derencz said. “Whether there’s a certain product people need, or whether people are just in need in general. One of the things this study found is that they’re preying on the precarity of individuals, and a lot of times folks are going to Google and doing searches for these types of loans, and running into bogus websites or just bogus organizations.”

Derencz suggests when in a pinch to look into nonprofits, ask friends and family for help or guidance, or get in touch with a credit union. Overall, he said it is important to do your due diligence and see what avenues are available to go down.

“It can be scary, you know, say that you are short on your rent, say that you are short on your utility bill for the month,” Derencz said. “I mean it’s a very scary thing, and the natural reaction is to just go ahead and hit that panic button. But you need to take a deep breath and look at all of the options out there.”

He also advises to be weary of unknown callers and emails. He said to take a look at what comes after the “@” symbols; legitimate payday lending companies won’t be sending information from a Gmail or Yahoo account. Derencz suggests going to a trusted brick-and-mortar location to get a payday loan if you decide to do so.

Another important tip he shared: read all of the terms and conditions before signing on the dotted line.

Click here to view the full study.

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