Lawmakers all over the country have begun to crack down on the business of quick cash loans. They are pricey, they are tough to pay off, the terms are frequently complex, the lenders aren’t particularly sympathetic, and the businesses seem to prey upon those who can least afford trouble – the poor and enlisted military personnel.
Payday loans are short term cash loans offered at a seemingly insane interest rate that averages 474% nationally. The payments are due, completely, in two weeks. If they are not paid in a timely manner, the interest continues to accrue. There are lots of stories of individuals who have borrowed a couple of hundred dollars, repaid several thousand dollars in interest, and were still sued for the unpaid balance. Because of the negative press that these businesses have been receiving, some of them have been trying to hide themselves while doing business under a seemingly unrelated line of work.
Here is an example:
A company doing business at the now defunct Website Acepays.com was providing loans of as much as $1000 disguised as “memberships.” The scheme was that individuals could become “members” of their Website and obtain discounts on merchandise offered for sale by the company. There were seven different memberships offered and each one promised greater discounts than the level below. The highest level, the “diamond” level, offered discounts of as much as 60% on merchandise and included a “cash rebate” of $1000.
Now why would anyone join and pay recurring fees in order to get a cash rebate? The plan worked like this – A person decided to join, had regular payments for the “fee” deducted from his or her bank card, and they then received the $1000 “rebate.” The problem, as the state of Pennsylvania saw it, is that the purpose of the Web site wasn’t to market discounted products; it was to lend money. There were a number of mentions on the Web site of how members could “get the cash you need now.”
The state regarded this as a high-interest loan business, and decided that the rate of interest offered by the company on their “rebates” was in excess of 600% per year, a somewhat exaggerated amount in light of Pennsylvania’s legal limit of 6%. The Website is no longer online and the company has promised refunds to some of the customers who were overcharged.
Many of these companies are still in business, and consumers should watch out for sales pitches that seem too great to be true. Joining a “membership” program for several thousand dollars in order to receive a $1000 “rebate” isn’t a good deal; it is a complete rip-off. Consumers should watch out, for there will be a lot of more companies like this doing business on the Internet soon.
Leave a Reply