Payday lenders using COVID to target the vulnerable
With a little creativity, payday lenders have been finding ways around Google and Facebook ad bans.
Ad giants Google and Facebook remove tens of millions of “excessively harmful” online ads every year, but the coronavirus pandemic has thrown many Americans into cash-strapped financial situations and new ads are finding creative workarounds.
In 2016, Google and Facebook banned ads for payday loans with short one- to three-month deadlines or interest rates above 36%, and Google banned payday lending apps in 2019 — all because of the predatory nature of the business, which draws people into a cycle of debt that’s very expensive and hard to escape. The Wall Street Journal recently said it “found ads from nearly two dozen websites for lenders, payday lead generators or other companies advertising or linking to products that violated policy” with rates as high as 200% to 500% interest.
Here’s what to watch out for:
- Search results: Payday lenders aren’t supposed to advertise, but their websites can turn up in the regular search results. Be careful what you search for.
- Vague promises for help: While not outright advertising for payday loans, some ads may highlight vague offers for help or free services to those in need in an attempt to grab your attention and eventually draw you into a payday loan.
- Links off the landing page: Google still allows payday loan companies to advertise other products and services that don’t violate its policy, but watch out for links from those pages to the pages that do offer harmful loans. If you don’t find what you’re looking for on the first page you land on, consider going back to Google and looking elsewhere.
- Pitches in disguise: Be leery of ads featuring cartoons or jokes, especially if the point of it seems too good to be true.
- Loans by other names: Just because a loan is called a personal loan or advance doesn’t mean it isn’t ripping you off. Pay attention to the fine print.
- Rates and fees: Even if a payday lender draws you in with a deceptively creative ad, pay careful attention to the interest rate you’ll be charged, the fees that go along with any loan and the length of the term. If the fees are expressed as $X per $100 borrowed, the APR is over 36% or the loan term is less than a year, it’s likely a payday loan and you may have much better alternatives.
How to protect yourself while getting help
While there are places you can turn to for help, there are also scammers and thieves lurking all over the Internet. Before you commit to a loan, check out the company or website offering it to you. See if there are reputable reviews that you can trust and watch out for these red flags:
- No phone numbers
- Repayments by wire transfer only
- Overseas provider
- Website is not secure (address is http:// not https://)
- You have to act fast
- Interest rates, fees or terms are missing or not clearly explained
Viable, fast alternatives to payday loans
Instead of expensive and risky payday loans, you may be able to get the cash you need through safer alternatives:
- Local banks and credit unions: In response to COVID-19, some money has been made available for emergency or hardship loans. If you already bank locally, you may be able to get a small loan with little or no interest.
- Grants and assistance: Check with your employer, city or county to see if any hardship grants or emergency assistance may be available for you. This could be in the form of cash or help paying rent, mortgage, utilities, medical bills or even transportation.
- Payday alternative loans from federal credit unions offer similar short-term loans but with interest at 28% or less.
- Pay advance apps: If you’ve still got income coming in and can prove it’s on a consistent basis, you may be able to borrow from your paycheck before it arrives. These apps may only ask you for an optional tip or a small fee, though the amount you can borrow is often limited to just $100 to $300.