How to Report Payday Loan Scams and Abuses

Payday loans can seem like quick cash when you need it, but they often come with extremely high interest rates and fees. Unfortunately, some payday lenders also engage in illegal or abusive practices. If you feel you have been the victim of a payday loan scam or abuse, there are steps you can take to report it and get help.

Common Payday Loan Scams and Abuses

Some common payday loan scams and abuses include:

• Unauthorized withdrawals or debits from your bank account
• Charging undisclosed or bogus fees
• Harassing collection practices when you fall behind on payments
• Issuing a loan without your consent or application
• Misrepresenting the loan’s costs or terms
• Threatening you with legal action or jail time

Payday lenders sometimes get access to consumers’ bank account information and make unauthorized withdrawals. Or they add on fees that were never disclosed. When borrowers fall behind, some lenders harass them with constant calls, threats of legal action, or even threats of jail time.

In extreme cases, scammers issue loans in consumers’ names without their consent and collect payments. Others misrepresent the cost of a loan by hiding the finance charges and interest rate in fine print.

Protect Yourself from Scams

You can avoid many payday loan scams by being an informed consumer:

• Research lenders carefully before providing any personal or financial information.
• Never share your bank login or account information.
• Read loan terms carefully and get verbal verification of costs.
• Do not electronically sign anything you have not read fully.
• Avoid lenders who ask for upfront fees before issuing the loan.

Legitimate lenders will be transparent about a loan’s costs and terms. Never take a lender’s word for it – verify the information yourself. Also, avoid lenders that require upfront fees before you even receive the loan, as this is a red flag for a scam.

Report Scams to Authorities

If you believe you have fallen victim to a payday loan scam, report it right away to the proper authorities, including:

• Your state attorney general – find contact information at NAAG.org
• Your local police or sheriff’s department
• Local adult protective services if you are a senior or person with disabilities
• The Consumer Financial Protection Bureau at CFPB.gov
• The Federal Trade Commission at ReportFraud.FTC.gov

Your complaints and reports provide important evidence of abuse patterns and help trigger investigations and enforcement actions. When filing your report, provide as much documentation as possible, including:

• A timeline of what happened
• Copies of loan documents
• Records of payments or withdrawals
• Notes from any calls or correspondence
• Contact information for the lender

Dispute Unauthorized Charges

If a lender has made unauthorized withdrawals or debits from your bank account, notify your bank immediately to dispute the charges. Ask for a chargeback to reverse any unauthorized or fraudulent transactions.

You can also close down the affected account to prevent future unauthorized transactions if needed. Open a new account that the lender does not have access to.

Seek Legal Help

Victims of payday loan scams may need to seek legal help to deal with issues like fraud, identity theft, or abusive collection practices. Contact a consumer lawyer or your local legal aid office to understand your rights and options.

An attorney can help you file police reports, sue the lender, and deal with any lawsuits or legal threats from the lender. They can also help negotiate settlements or payment plans if you owe on a legitimate loan.

Report and Dispute with Credit Bureaus

If a lender has issued a loan in your name without consent, report it as fraudulent to the three major credit bureaus:

• Experian
• TransUnion
• Equifax

Follow up in writing with letters disputing any fraudulent accounts or debts and request they be removed from your credit report. This can help minimize damage to your credit.

Avoid Scams in the Future

Once you have reported a payday loan scam and taken steps to protect yourself, take measures to avoid scams in the future:

• Use credit carefully and maintain good credit to expand your borrowing options.
• Build up emergency savings to avoid needing quick cash through high-cost loans.
• See if your state allows wage advances through employers as an alternative to payday loans.
• Join a credit union which may offer small personal loans at lower rates.

The most important thing is to learn how to identify red flags of a predatory lender. Only use reputable lenders and fully understand loan terms and your rights as a borrower.

Payday loans can create a cycle of debt that is hard to escape. But through caution and reporting scams when they happen, you can protect yourself and help bring unscrupulous lenders to justice.