FRESNO — As consumers lost jobs and struggled to make ends meet during the COVID-19 pandemic, many turned to payday loans and other short-term solutions, with an increase in online solutions. This not only allowed predatory lenders to thrive – many borrowers still contend with sky-high interest rates and opaque fees – but also created a fertile environment for scammers, according to a new in-depth investigative study by Better Business Bureau (BBB).
Payday loan laws are handled on a state-to-state basis among the 32 states in which they are available, and a complicated web of regulations makes the impact of the industry in the U.S. and Canada tough to track.
The BBB study finds one common thread, however, in the triple-digit interest rates many of these loans carry – camouflaged by interest that is compounded weekly or monthly, rather than annually, along with significant rollover fees.
Image by Towfiqu Barbhuiya.
From 2019 to July 2022, BBB received more than nearly 3,000 customer complaints about payday loan companies, with a disputed dollar amount nearing $3 million. Additionally, more than 117,000 complaints were lodged against debt collection companies at BBB.
Complainants often said they felt ill-informed about the terms of their loans. Many fall into what consumer advocates call a “debt trap” of stacking interest and fees that can leave customers to pay double the amount they originally borrowed. One woman in St. Louis, Missouri, told BBB…
