The Latest Payday Loans Scam
We've written elsewhere why it's best to avoid loan sites charging upfront fees, and also about why payday loans have a poor reputation, but a new scam has come to light that combines the two industries. This is one you really want to avoid.
The Fee-Charging Payday Loans Broker
It's become common now for online payday loans sites to be brokers rather than lenders. What this means is you fill in one form with all your details, and this is automatically passed from one lender to another until one of them approves the application. If you accept the offer made, you get your loan, the lender gets your business, and the broker gets a commission. Everyone is happy.
Unfortunately, more and more sites are acting as if this is what they do, but in fact operate rather differently. Firstly, after taking all your application information (including your bank details), you will be presented with terms and conditions mentioning, not necessarily very obviously, a processing fee which will be charged in order to find you a loan.
As soon as you click through and submit your application, this fee is going to be taken from your bank account, whatever the result of the loan 'search'. While legitimate brokers will try lenders one by one, these scammier sites often just 'blast' your information out to dozens if not hundreds of lenders at once. This can lead to a deluge of telephone calls from the lenders following up on the lead they've been given.
What's even worse is that using this scattergun approach, some fee-charging brokers actually pass on your details to other fee-chargers without your knowledge, and this will only come to light when a charge from an unknown company appears on your bank statement.
What Can Be Done?
The major retail banks have recently become aware of the problem, and say they are working on ways to fix it, but as always the advice must be:
Think very carefully before committing yourself to an upfront fee for any loan service. It's almost always best avoided.
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