Why payday lenders ask for your bank account details

Why do payday lenders need my banking details?

Payday lenders ask for your account number and routing number for several reasons.

• Verify your bank account. Most loans require you to have an operating bank account to qualify. This is an easy way to verify that you’re eligible.
• Check your ability to repay. While it’s no longer federally required, most legitimate lenders will want to make sure you can afford the loan. Your bank credentials lets it quickly access your bank statements.
• Deposit funds. Online payday lenders often send the funds directly to your bank account using an ACH transfer. But they need your bank account to do so.
• Collect repayment. Having your bank account information makes it easy for you to lenders to set up automatic repayments on the day it’s due.

What bank account information do payday lenders need?

Online lenders ask for your routing and account number, while storefront lenders typically ask for a voided check — which contains your routing and account number. Some might also ask to see copies of your bank statements.

Here’s a list of exactly what bank account details top payday lenders will ask for.

Is it safe to give out banking details?

Yes, if you’re applying with a reputable lender. Reputable short-term lenders will not store your login details and should have a secure, encrypted page for you to submit your bank account numbers along with your other personal information.

However, this doesn’t mean there aren’t scams out there. Here are some quick tips to spot a bad lender:

• The company requests your login details over the phone or through email.
• The login page or application page is unsecure, and your browser shows a warning symbol.
• The company claims you need to pay a fee before applying.

How to protect yourself from payday loan scams

What other information do payday lenders usually ask for?

Beyond your checking account information, payday lenders will often require you to provide other sensitive personal details. This can include your full name, date of birth and Social Security number. Many providers will also want information about your employment or income, your current residence and how to best contact you.

These questions are common with most loan applications, and because they reflect your unique financial situation, you should take care when applying. Make sure your lender has a secure application page with “https” in the web address.

If you’re submitting your information through a matching service, be sure to only provide your banking information or Social Security number to companies with limited sharing policies.

Available options if you don’t want to use a bank account

Unfortunately, there aren’t many payday lenders out there willing to extend loans to people without bank accounts. You’re unlikely to find a lender that doesn’t at least require a bank account to confirm your financial status, but that doesn’t mean there aren’t options. As long as you can prove your income, you may be able to find a lender that wants to work with you.

• Provide collateral. An auto title loan or pawn shop loan can be easy ways to get small amounts of cash to cover an emergency debt without providing your bank account details. However, keep in mind that securing a loan with your car or other items can result in repossession if you fail to repay.
• Visit a store location. If you’re able to visit a payday loan store location, you may be able to receive your loan as cash or as a check by simply providing pay stubs or other verified proof of your income.
• Use your savings account. Some lenders issue loans to people who have a savings account but no checking account, such as ACE Cash Express.
• Request a prepaid debit card. You may be able to find a lender that offers loans that can be loaded onto a debit card without request bank account information.

Bottom line

Most payday lenders ask for your banking details in order to transfer your loan funds into your account and debit your payment when it’s due. But you should still be wary of lenders that don’t have secure websites or request a fee to fill out the application. If you aren’t comfortable providing your bank account information, your loan options are limited but you do have alternatives to explore.

Frequently asked questions

• What happens when my loan is due?

  When your loan is due, the lender will debit the payment directly from your account. This method may be convenient, but it can also lead to extra fees. If you don’t have enough, the lender may keep attempting to debit your account, charging you non-sufficient funds fees each time and causing your bank to charge overdraft fees.

• Can I stop direct debits from my account?

  Yes. According to the Consumer Finance Protection Bureau (CFPB), you’ll need to follow these steps to stop automatic transfers from your bank account:

  1. Inform the company in writing and over the phone that you no longer give it permission to directly debit from your account.
  2. Inform your bank or credit union that you have “revoked authorization” from the company. The CFPB has a sample letter you can use if you’re unsure how to do this.
  3. Initiate a stop payment order.
  4. Make sure your accounts are no longer being accessed by the lender; if they are, you have the right to dispute these charges and get your money back.

• How do I know if a web page is not secure?

  Page security is the first thing you should look for when browsing a lender’s website. There should be a small lock in the address bar that indicates the page is secure, and the lender should have information on the encryption service it uses easily available in its FAQ or on its privacy policy page.