CFPB Accuses Online Payday Lenders of Exposing Customers to Hidden Risks

Jun 6, 2016 by

CFPB Accuses Online Payday Lenders of Exposing Customers to Hidden Risks

Dealing with emergency expenses is difficult for even the most affluent among us. Lower income households, however, can fact outright ruin when financial emergencies rear their ugly heads. And many low to mid income households in this country are either underbanked or unbanked, so they often have very few options when they need to borrow money to take care of these types of expenses. Often, these folks turn to alternative financial service providers, like online payday lending companies.

More often than not, people who take out payday loans run into no problems with repaying them, and they are then free to go about their normal routines. In some cases, though, people get hit with fees that they may not have expected. Some reports have shown that borrowers pay an average of $185 in penalties from their banks – usually overdraft or non-sufficient fund fees – when lenders go through the process of automatically deducting repayment for loans given. It is estimated that about a third of online borrowers who winded up with bank penalties had to deal with involuntary bank account closures.

This has happened to consumers when online lending companies repeatedly make debit attempts on their customers’ accounts. This causes extra bank fees to kick in for the account holders, even though these efforts usually lead to no payment being recovered on the part of the lending companies.

Of course, the CFPB is keeping tabs on online payday lending companies, so it comes as no surprise that the Director of the CFPB, Richard Cordray has a strong opinion on these types of issues. Cordray said, “Each of these additional consequences of an online loan can be significant, and together they may impose large costs, both tangible and intangible, that go far beyond the amounts paid solely to the original lender,” said CFPB Director Richard Cordray.

These findings come with the third analysis that the CFPB has done on the United States payday lending industry. Payday lenders provide unsecured loans to their customers, and typically the person who borrowers from one of these lending companies pays the lender back within a few weeks. It used to be that most payday lenders got paid back via a post-dated check. These days, though, online payday lenders usually automatically deduct the loan amount plus fees when the loan has run its term. The Obama administration has always had a disdain for this industry, and has supported the CFPB in its efforts to cook up new regulations that could potentially drive a lot of smaller lending companies out of business.

The CFPB analyzed about a year and a half’s worth of data from Automated Clearing House. This is the financial network used to put money into a borrower’s account and also to extract payment when the loan payment comes due. The data analyzed showed that some borrowers did not have adequate funds in their accounts when the loan repayment request happened, and that this – as one might expect – resulted in people getting hit with overdraft charges from their banks.

Here’s the thing, though – these fees are not charged by payday lending companies; it is the traditional banks that love to profit from imposing these fees. It is not the fault of a lender if a borrower does not live up to their end of the agreement by having adequate funds to cover the transaction in their bank accounts. No matter how much Cordray and his team want to twist these types of situations into being the fault of online payday lenders, the bottom line is that the fees are charged by the banks and happen because consumers fail to keep enough money in the bank to cover loan payments that they knowingly agreed to. End of story.

read more

Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Feb 2, 2016 by

Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Companies and individuals that provide financial services to the people of this country – whether big banks or individually owned lending shops – owe it to consumers to be transparent in all of their dealings. We all know, however, that this is not always the case. There are always lenders that will be deceptive. It can be a big bank or the smallest of title loan companies, and the deception can be purposeful or possibly an oversight. The thing is, though, that the Federal Trade Commission (FTC), and other government watchdog groups are making it their collective mission to crack down on deceptive financial practices. Sure, it does seem to happen to alternative financial providers more often than big banks, but it happens nonetheless.

To illustrate this point, the FTC recently settled charges against two different payday lending companies. These charges allege that the lenders charged consumers illegally via inflated and sometimes undisclosed loan fees. The two companies are SFS Inc. and Red Cedar Services Inc. Each company had to pay $2.2 million. By doing so, they were allowed to jointly wave an estimated $68 million in fees to people that did not get collected.

These charges, when totaled up with some previous settlements, add up to a whopping $25 million that the FTC has collected related to this particular case against Red Cedar, AMG Services Inc. and SFS, along with various related lending operations. The case also allowed for about $353 million dollars in debt to be waived. The combined efforts have made this the largest recovery that the FTC has pulled of so far. And there is still pending litigation against some other defendants that will likely bring the total higher.

The Director of the Bureau of Consumer Protection, when asked about payday lending practices, said, “Payday lenders need to be honest about the terms of the loans they offer. These lenders charged borrowers more than they said they would. As a result of the FTC’s case, they are paying a steep price for their deception.”

The charges that kicked all of this off date back to April of 2012. These charges, which were filed in federal court, allege that the lending companies made misrepresentations about how much it would cost consumers to borrow money. This is considered to be a direct violation of the FTC Act. An example from this case was a time when Red Cedar, MNE Services and AMG Services used a contract which told the borrower they would have to pay $309 for a $300 loan. However, the borrower ended up being charged $975.

The defendants have also been accused of failing to disclose the actual annual percentage rates of the loans, along with other terms. This is being handled as a violation of the Truth in Lending Act. To make matters worse for the lending companies, they made preauthorized debits from the bank accounts of borrowers. This is a violation of the Electronic Funds Transfer Act. SFS and Red Cedar operated as lending companies under the names One Click Cash and 500 Fast Cash.

Lending Companies Should Keep These Kinds of Cases in Mind!

This case, like many others that the FTC and CFPB have been behind recently, should serve as a stern warning to lenders that there is always someone looking out for deceptive financial practices. The majority of payday lending companies out there make it a point to be straight with consumers. But it appears that those who don’t will have a heck of a lot of explaining to do; along with a lot of money to cough up.

read more

You Cannot Plan For The Unexpected

Dec 31, 2013 by

You Cannot Plan For The Unexpected

Here’s the main thing you have to understand about life: as much as you think that you can plan for things, the unexpected is just around the corner. This is especially true when it comes to your fnances. While you may find that a few months of good fortune allows you to save money and have Financial Relief, you soon find that Unexpected emergencies occur that can lead you back to a situation where you don’t have the money to pay for your monthly bills. It doesn’t matter how financially responsible you may be, these unexpected issues can throw you for a loop. Even if you have put money away, these issues can quickly lead you looking for a loan to make sure that you don’t fall behind on your regular monthly bills. While you may be looking for Payday Loans that you can get either from those who offer Text Loans or Bad Credit Cash Loans for surprisingly little risk, you are also looking for peace of mind that you don’t have to worry about taking a credit hit, and further financial issues, due to events that have occurred.

A Wide Variety Of Events Can Effect One

Risk

There are certain events that are apt to lead you to financial issues. While there are a wide variety of things that can through you for a loop, there are some that tend to occur more than others. For example, if you have a car, you are going to have repairs and services needed here and there. Sometimes, though costs will eat into your savings, and affect your ability to pay monthly bills. Same goes for health issues that either lead a family member into the emergency room or, worse, spending the night in the hospital.

Be Smart About The Loan That You Pick

While there is no such thing as a “no risk” loan, there are some loans that are less risky than others. Payday loans tend to be on the lower side of the risk because they should be paid back the next month, and they are based upon the money that is coming in a paycheck.

read more

How A Cash Advance Can Help You Get Through A Short-Term Crisis

Oct 23, 2013 by

How A Cash Advance Can Help You Get Through A Short-Term Crisis

Are you struggling with a short-term cash problem? Are you looking for a quick and easy solution? A non-secured Cash Advance loan can help solve your short-term financial emergency. A payday loan or a cash advance loan is a short-term loan that is held against your next check allowing you to cover those unexpected emergencies or cash flow problems. There is normally no credit check involved and you can have your money when you need it, no unnecessary waiting and worrying. Payday loans are popular because they are flexible, simple and get the money in your hands fast.

Reasons You May Need a Payday Loanred-cross-bandaids

  • Car Repair will be needed if your car breaks down and you have no access to transportation. It’s important for you to have transportation so that you can get to work. Quick cash can help you get your vehicle repaired before your next paycheck so you can continue to get to work.
  • Many people today are uninsured. You can have a medical crisis that can cause financial problems. You may need to pay for medicine or medical emergencies that you were not expecting. Doctor office bills alone can cost anywhere from $60 and up.
  • Unexpected Bills such as higher utility bills due to warmer summer or colder winter. Extra money may be needed to keep them from being disconnected. School expenses or legal expenses due to divorce or court proceedings.
  • Travel expenses due to the death of a family member or moving out of state. If you live out of town you will have unexpected travel expense to attend funeral services, etc. If you or your child are attending college out of state, you will have travel expense for that as well.
  • For a family illness or death you may have to come up with some money to help pay for the funeral expenses.
  • Taxes such as your property tax or income tax that needs to be paid.
  • If you were in an accident and need to have your car repaired, you may be required to pay a deductible.
  • Storms such as hurricanes, tornadoes, hail or floods can occur at any time. You may need fast cash to have tree limbs or other items that have been damaged by storms removed until you can get your insurance check. You may need cash so that you have temporary shelter available for your family as well such as a motel room. Insurance checks can sometimes take weeks before they get to you.
  • Veterinarian bills. Most people don’t carry pet insurance. What happens if your pet runs out in front of a car and get hit? If your pet has an illness and needs emergency surgery and medicine how will you pay for those expenses? A pet crisis can be expensive. An average emergency pet surgery could cost up to $1500.

General Payday Loan Requirements

  • Must meet the minimum age requirement of at least 18 years of age.
  • Must have proof of income. Income levels vary with each lender. The cash loan is secured against your income. If you don’t have the required income your loan cannot be processed.
  • Must be employed. Some lenders require a certain amount of time that you have to be on the job such as 3 months.

How to Get a Payday Loan

  • Determine how much cash you require.
  • Apply for the loan. It’s fast and easy. You will fill out a simple application online, in person or by phone. You will need basic information such as job and income verification and checking account information such as your checking account number and bank routing number.
  • Once approved, your money will be given to you directly or deposited into your checking account according to what was set up during the application process generally within 24 hours or less.

You don’t need to struggle with short-term financial problems. When you borrow responsibly, payday loans can help you get through a short-term financial crisis until you get your next paycheck. They are designed to give a person an extra boost when cash is needed that cannot wait. When applying for a cash loan, have a clear understanding of the loan requirements, lender fees and interest rates as these vary from state to state and lender to lender.

read more

A Payday Loan When You Need Money

Sep 26, 2013 by

A Payday Loan When You Need Money

The best thing that you can do for your car is to take it in for regular oil changes roughly every 3000-7500 miles, depending on your car, and to take it in every 10,000 miles or so for a tune-up. If you do this, you will find yourself doing more cost-effective preventative care that fits into your budget then “emergency” care that can cost you much more to do. With all of that said, there are still going to be Unexpected Emergencies with your car. Whether you notice that you are leaking oil, or you end up stuck on the side of the road with a car that won’t start again, you can expect to pay money to fix it. In these types of situations, you are going to have to reach into your monthly budget to pay for the costs, which could leave a shortfall when it comes to what you can use to pay your month bills. When Car Repair or Shopping sales have left you a little short on what you need to pay, you need to take a look at cash advance payday loans that are available.

One of the biggest benefits that you will find from a payday loan is the fact that you can typically get the exact amount of money that you need. Why take out a $1000 loan if you only really need $250 to pay off a bill. Payday loans typically range from $50 to $2500, and are based upon what you will make in your next paycheck. Because you only take out the money you know you can easily pay back, it makes more sense over other loans.

While you should never make a habit out of payday loans, just like any other type of loan that is out there, they are there for you when you really need it. They come in most handy when you are just a bit short of a bill that is due and you know that you will have the money the next paycheck. You can find more info by contacting one of the many companies out there.

read more