Avoiding scams and predatory lending

The key ideas

Payday loans

A typical two-week payday loan fee of $15 per $100 borrowed works out to an APR of almost 400%, according to the CFPB. Many borrowers end up rolling loans over repeatedly.

Upfront fees

Legitimate lenders don't ask for a fee by gift card, wire or cryptocurrency before giving you a loan.

Pressure and secrecy

Being rushed, told not to talk to anyone, or asked to keep an offer secret are classic scam signs.

Impersonation

Scammers pose as banks, the IRS, government agencies or loan servicers. Hang up and call the organization using a number you look up yourself.

Credit unions as an alternative

Many federal credit unions offer small payday alternative loans (PALs) with capped rates.

Questions to ask yourself

• Can I verify this company on my state's regulator or the CFPB website?
• What is the APR and the total I will repay?
• Would I be comfortable if a trusted friend read this offer?

Free help

ReportFraud.ftc.gov

Report scams to the Federal Trade Commission.

CFPB complaints

Submit complaints about financial companies at consumerfinance.gov/complaint.

This guide is general education for US households, based on how things typically work. Rules, rates and program details change and vary by lender and state. It is not individual financial, legal or tax advice, and it isn't an offer of credit. Pennies & More isn't paid by any lender or company mentioned here.