The Clinton Herald, Clinton, Iowa

Opinion

December 21, 2013

How easy is it to get an online payday loan?

I get a fair number of complaints from folks who say they just got a phone call from someone threatening to send the sheriff or the police out to arrest them, for committing fraud.

The fraud?

Not paying back an online payday loan. These callers usually quote a debt owed for several thousand dollars, but are willing to settle for 20 or 30 percent of that if you make a payment immediately, as in “right now.” These callers will use legal terminology and titles such as “investigations unit” or “fraud division”, which causes some consumers to think the callers are directly linked to law enforcement.

First of all, law enforcement is not out debt collecting for payday loans. I’ve written before about the rules for debt collecting, and threatening arrest is a big no-no for debt collectors. So consumers who hear such threats should know right away these callers are not above stretching the truth and anything they say is suspect. I encourage anyone getting such threats to contact me.

After hearing dozens of these complaints, I started to wonder: Why do online payday loans seem to be behind these supposed debts? I did some research. I learned the payday loan industry made $49 billion (that’s billion with a b) in loans in 2012. One third of the loans happened through online applications. The entire payday loan industry is very controversial. The practice of offering these high-interest loans, usually in excess off 360% annual interest, is banned in fifteen states. Consumer advocates claim the industry preys on the poor and desperate, leading them into a cycle of perpetual debt. The industry defends itself by claiming they serve a segment of the populations which cannot get loans anywhere else.

A reporter from Planet Money, a radio news show, did some of the same research. The reporter applied for an online payday loan through a website offering such loans. The reporter made up everything on the online loan application, including her name, address, and social security number. She provided her real phone number, however. She got an immediate response, telling her a loan company pre-approved her for a loan. But she did not get just one response. She received dozens of calls, over a period of months, offering loans up to $5,000, from many different loan companies. Many of the calls came from callers with strong foreign accents.

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Poll

With the Clinton County Justice Coordinating Commission and the Clinton County Board of Supervisors discussing proposals to construct a new jail, do you think the time has come for Clinton County to construct such a facility?

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