Lenders use abusive or unfair practices to trap low income into a never-ending cycle of debt. Learn to spot the scams:
The goal of a predatory loan (such as payday loans) is to trap the borrower in a nightmare of never-ending debt. The lenders know that no one is watching or, in some cases, cares that the poor are preyed upon by these unscrupulous lenders. Those lenders hope that their schemes to keep the poor paying outrageous interest rates, which forces them to take out more payday loans. There are a few states taking action – see State Payday Loan Reform from Pew Charitable Trusts, a nonprofit public interest group.
The following are highlights from an article by Annie Millerbernd of Nerd Wallet, November 19, 2019
Five signs of a predatory loan:
No Credit Check Ads. The lenders make it as easy a possible for the unwary borrower to get trapped in the never-ending loan cycle.
Focus on Monthly Payments. Like a magician trying to distract you – the lender advertises low monthly payments but hides the length of the loan or very, very high-interest rates.
Sky-High Rates. A bad lender is one that hides the interest rate on its website or advertisement. They hope to distract you by flashing signs and soothing language offering to solve all your problems (I call this the drug dealer’s promise). There are reports of interest rates 300% to 700%. For instance, if you borrow $10, you have to repay $50.
Excessively Long or Short Repayment Periods. Many predatory loans result in the borrower paying more than they originally borrowed (sometimes as much at 5-7 times more).
All-in-one Payment Requirements. According to Alex Horowitz, a senior research office with Pew Charitable Trusts, “the average payday loan takes 36% of a borrower’s paycheck.” If the borrower cannot make the payment (few ever can), they take another loan to pay the first loan – the cycle goes on for years until the borrower finally sells their only vehicle to pay the debt or files bankruptcy.
MUSINGS FROM DIANE:
Desperate people do desperate things. Some rob to feed their family. Others gamble their entire paycheck with the hopes of winning enough to pay the mortgage. What most don’t do is ask for help or seek informed advice from those who care.
Is credit important in our economy? Absolutely, but should we be more concerned with buying the latest cell phone or owning an expensive house or car (just to impress friends or family), or focus on buying only what we need and save for unexpected expenses.
Good information is always available, if only you ask. But, you must use common sense. Never assume any advertisement is truthful. Typically, the goal of a sale is to get as much of your money as possible, for the least cost to the seller.
By Diane Drain|Published On: December 1st, 2019|Last Updated: May 29th, 2022|
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
5 / 5
“You folks are the BEST OF THE BEST in Arizona.” M.H.
You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.
5 / 5
“My only regret is that I didn’t find Diane sooner.” K.H.
I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.
5 / 5
“Filing for bankruptcy can be a stressful life event” R.A.
Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.
Want to avoid dishonest debt collectors? Watch this video from FTC’s Consumer Advice By Joseph Ferrari,July 22, 2022 (reprint from FTC, Consumer Alerts) During Military Consumer Month 2022, the FTC [...]
CFPB Submits 2020 Report to Congress on the Administration of the Fair Debt Collection Practices Act Report highlights commitment to protect consumers during the COVID-19 Pandemic The Consumer Financial Protection Bureau (CFPB) released the [...]
My intention is to put you back in control of your life
Start with $0 down*. We provide affordable payment plans.
We are a debt relief agency; we help individuals and small businesses through the bankruptcy process. Attorney Advertising. This website is designed for general information only. Any information you obtain from this website should not be construed as legal advice, nor as grounds for forming an attorney-client relationship. You should consult an attorney for information on obtaining formal legal advice.