Earlier this month, the Better Business Bureau (BBB) released the results of a 3.5 year study on debt collection companies, payday loans, and financial scams. The result, although not surprising, was disturbing.
The BBB reports that from January 2019 to July 2022, it received a staggering 117,415 complaints about debt collection companies. That equates to over 90 complaints a day. Every day. For 3.5 years. And that's almost certainly an enormous undercount. Many people who are bothered by a company's tactics are rarely so animated as to feel compelled to report that company to the BBB, and debt collection company tactics disproportionately impact the most marginalized members of society who are both reticent and unaware of resources for reporting problematic company behavior. If you or someone you know is being harassed by a debt collector, don't hesitate to report them to the BBB, and please seek out an attorney; debt collection is regulated by the Fair Debt Collection Practices Act (FDCPA), and borrowers who successfully sue debt collectors for violating it can win a monetary award and have their attorney's fees paid for by the debt collection company.
The BBB information on payday loans highlights the vulnerabilities of consumers and patchwork of regulation in this area. Payday loans are microloans for small sums that are usually due for full repayment in a week or two. The BBB report explains how these loans often advertise a moderate interest rate to entice borrowers, but because they are due for very fast repayment, when annualized the annual percentage rate (APR) can actually climb as high as several hundred percent. The conversion - and even the distinction - between the interest rate and the APR is incredibly difficult for borrowers to understand, and many, if not all, have absolutely no idea what the financial ramifications are for the loan they're getting. The BBB report includes several sad stories of borrowers who took out loans of a few hundred dollars only to end up paying over a thousand dollars in interest as they struggled to pay it off, often to the detriment of being able to afford necessities like food, housing, and transport. If you or someone you know is considering taking out a payday loan, don't! It's almost never a good decision financially, and it can very easily lead to even more severe financial distress. If you or someone you know is in financial difficulty, reach out to public resources like food banks, shelters, community organizations, religious entities, etc., to get assistance instead. If you or someone you know has already taken out a payday loan and is struggling with repayment, reach out to an attorney for assistance. They might be able to assist in negotiating the debt, or they might be able to advise if the loan complies with the Truth in Lending Act (TILA), and if not, be able to assist with potential recourse under that law.
The final portion of the BBB report examines debt collection and payday loan scams, which in its study cost victims an aggregate $4,145,808 over the 3.5 year period examined. The BBB has several great pieces of advice for borrowers in avoiding scams, chief among them being: protect your personal information and get any information about an alleged debt in writing. Scammers often use stolen data about borrowers and misleading, intimidating tactics to get sensitive information such as bank account or social security numbers from victims in order to steal money. If you or someone you know is confused or feeling pressured by any communications about an alleged debt, reach out to an attorney for assistance. An attorney will be able to assist in both determining whether the debt is valid and whether there is a violation of the FDCPA in trying to collect money illegally.
Key takeaways from this post:
If you're feeling harassed, confused, or intimidated about a debt, reach out to an attorney for assistance.
Think twice before ever taking out a payday loan; if you already have and need help, reach out to an attorney to assist in dealing with the lender.
You can read the BBB report summary here, the full study here, and review an infographic on the study here.
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