Don’t be the next victim of a payday loan scam!
In these scams, a “representative” of a collection agency tells victims they must pay their outstanding balance on a payday loan. Unfortunately, the caller is completely unaffiliated with any legitimate agency – they’re just a scammer trying to rip them off or steal their identity.
In some variants of the scam, people have been visited at home or at work by a phony process server. In other cases, the fraudster informs the victim there’s a warrant issued for their arrest for failure to pay a loan (unless there is evidence of fraud, you will not be arrested for failure to repay a payday loan).
Their strategy? They want to make it easier to pay them than resist them. That’s why you need to take action.
Be on the lookout for these six red flags:
1. You've never received a payday loan
While these scams usually target people who have filled out an application for a payday loan, they sometimes go after victims who haven’t done so, or who have but not have yet been granted the loan. Obviously, you can’t be late paying back a loan you’ve never received.
2. The caller threatens arrest
A legitimate loan company will never threaten you with immediate arrest.
3. Caller refuses to divulge the name of the collection agency
If callers actually represent a collection agency, they should have no problem identifying this company by name.
4. You can’t find any information about the agency the caller allegedly represents
If callers named the agency they allegedly represent, but you’re still suspicious, do a Google search on the company. If you can’t find proof of the company’s existence or the search turns up evidence of previous scams, hang up!
5. You haven’t received a validation notice in the mail
By law, anyone representing a collection agency and attempting to collect an outstanding debt must send a validation letter to the debtor. This letter informs borrowers that they can dispute the debt within 30 days, and specifies the amount of money owed as well as the party to whom it must be paid.
If you have not received any such letter in the mail, you’re probably looking at a scam.
6. The caller only accepts immediate payment over the phone
When a “collector” insists you pay in full over the phone and refuses to furnish an address to which you can mail your payments, you’re likely talking to a scammer.
How to Take Action
If you are targeted by scammers pushing this scheme, immediately contact your local police department. You should also report the scam to the FBI’s internet crime complaint center.
Additionally, if someone has enough information on you to contact you at home and at work, your identity may have been compromised — especially if the scammers have correctly identified a financial services company with which you have done business.
In this case, it’s prudent to contact your bank or credit union and credit card companies. You may also request a fraud alert or credit freeze be placed on your credit bureau reports by contacting the three major credit bureaus: Experian, Equifax, and TransUnion.
