Once again scammers are looking to steal from those in the most desperate of situations as recipients of payday loans are targeted by crooks posing as collection agents.
Payday loans are a trap that too many hard-pressed consumers find themselves falling into due to their
financial needs. For a fee, ranging anywhere from $10-$15 per every
hundred, the lender will accept a post-dated check to withdraw the
loan amount plus interest from the borrower. The loans tend toward
high interest rates and incredibly short repayment terms, so a
high-percentage of customers end up rolling these loans over again
week after week. Eventually the fees add up and they are effectively
borrowing against an annualized interest rate of anywhere fro 300%APR
to 750%APR depending on how long they have been trapped in the cycle.
As if this practice wasn’t bad enough on it’s on, recent collection scams have targeted those trapped in the payday loan spiral.
The Better Business Bureau issued an alert for consumers who had taken out payday loans within the past
few years to be on the lookout for calls from scammers claiming to be
lawyers working with the “Financial Accountability Association”
or the “Federal Association of Unsecured Loans.” The con artists
phone calls begin with accusations that the victim has defaulted on a
payday loan. The caller then demands that up to $1,000 be paid
immediately, either by wire transaction or via credit card.
If the victim refuses to pay, the threats quickly begin. The scammers claim that if the payment is not
made, police will be sent to the victim’s home within the hour at
which point they will be arrested and extradited to California to
The Better Business Bureau has shown concern that there might have been a significant data breach, as this
scam has been targeting those who have in the past taken out payday
loans. Even more troublesome, the callers appear to have access to
personal information before they call, such as victim’s addresses
and social security numbers. Whether this information was stolen, or
sold by a crooked payday loan company or employee, the result is an
air of legitimacy that leads to a higher scam success rate.
The crooks running this scam are highly aggressive, sometimes making dozens of calls to the intended victims
in a short amount of time. There are also reports that those who
have fallen for the scam and made the initial payment are then
targeted even more vigorously with continued harassment and demands
The Washington State Department of Financial Institutions issued a press release stating, “Please note
that these scammers are frighteningly well informed, very persistent
and extremely threatening. Anyone who has been contacted by them
should take steps to protect their personal financial information and
treat this as a matter of identity theft.”
Payday loan recipients are not the only potential victims for these collection scams. According to an
article by Alysse Dalessandro on WalletPop.com, the Ohio Attorney
General’s office recently warned of another payday loan collection
scam that had recently plagued their state.
The phony bill collectors claimed to be representatives of a genuine pay day loan company located in Kentucky
called U.S. Cash Advance. These calls were pretty much going out
blindly, mostly targeting those who had never actually taken out a
One potential victim issued a complaint claiming that a scammer who said he was with U.S. Cash Advance
harassed her via her office phone by making 25 calls over the course
of one work day. Each call came with a demand of immediate wire
transfer payment of $300. Others payment demands in this particular
scheme have ranged as high as $2,100.
The article notes that the Better Business Bureau said U.S. Cash Advance does not provide loans
exceeding $450 and they never will have their agents call over the
phone to demand payment through wire transfers.
Here are some tips for those who find themselves on the other end of the phone line from a payday loan collection scammer:
— If a debt collection agency calls, always have them provide the name of their agency, location and
telephone number. Offer to call them back at the provided number.
If it is indeed legitimate, you should request proof in writing as to
the exact amount of the money you owe. This is required by law.
When asking for this information to be mailed to you, do not provide
your mailing address. If they are indeed a legitimate company they
will already have the information on file.
— Never provide or confirm any personal information, bank account numbers or credit card numbers
over the phone unless you have already confirmed the legitimacy of
— If the caller is abusive or threatens you with court dates, lawsuits or even arrest over an owed
debt, this is in direct violation of federal telemarketing laws. You
should let them know you are aware of their transgression and hang up
immediately. These types of calls should be reported to the Federal
Trade Commission (contact info provided below).
— If you are sure you don’t owe the debt the creditor is calling about, the Better Business Bureau
recommends placing a “Fraud Alert” on your credit reports and
then examining them carefully to ensure you have not been charged
erroneously. Everyone is allowed one free credit report each year
Those crooks behind these payday loan collection scams are once again looking to feed off of those in
desperate situations. If the creditor calls start to come in, as a
consumer its important to remember you do have rights. So be sure
you know them. And if you can’t avoid taking out a payday loan,
and there are links to alternatives provide by the FTC below, at
least don’t compound the problem by falling prey to these callous
To report a potential collection scam or report an abusive or threatening creditor call, please contact the Federal Trade Commission:
The Federal Trade Commission’s Fair Debt Collection Practices Act outlines the basic rights of all consumers:
To learn about collection laws in your state, check out the Privacy Rights Clearinghouse Debt Collection Law Guide: