ROCKFORD — As consumers struggled to make ends meet during the pandemic, many turned to payday loans and other short-term solutions.
In turn, consumers have seen an increase in online solutions.
This options paralysis has allowed predatory lenders to thrive by forcing borrowers to face exorbitant interest rates and cloudy fees.
What’s more, scammers have begun to thrive, according to a new in-depth investigation by the Better Business Bureau.
Dennis Horton, Director of the Better Business Bureau’s Rockford Regional Office, says, “Scammers don’t miss an opportunity to take advantage of consumers, as our BBB Scam Tracker has received over 7,000 loan and collection scam reports from receivables representing approximately $4.1 million. in losses. »
Payday loan laws are administered state by state in the 32 states where they are available.
A complex web of regulations makes the industry difficult to keep up with.
Illinois currently caps rates at 36%.
Many loans bear compound interest weekly or monthly instead of for a year.
Significant rollover fees can also affect borrowers, as rates can soar into triple digits.
From 2019 to July 2022, BBB received over 3,000 customer complaints about payday loan companies.
In addition, BBB received 117,000 complaints against debt collection companies.
Scammers arm themselves with stolen information and pose as debt collectors to convince customers to hand over banking information or money.
The BBB study recommends that consumers thoroughly research all of their borrowing options.
Advice to consumers:
- Illinois requires payday lenders to allow you to start a repayment plan after you’ve been in debt for 35 days, but you have to ask.
This action may reduce the charges that may be imposed on you. - Research alternatives to a payday loan.
Ask for help from your family, friends or church. - Contact your creditors to try to work out a payment arrangement, eliminating the need for a payday loan altogether.
- Check if your checking account has overdraft protection.
This would save you overdraft fees. - Consider a credit card cash advance.
Interest rates may be high, but there won’t be the added cost of a short-term loan.
