This may not come as a surprise, but some of the payday loan businesses that operate from websites and send out spam e-mails by the million are not on the up and up. That goes for brick-and-mortar payday loan businesses too.
How do I know that? A little basic research into the criminal justice system gives some insight into the lengths people will go to steal your money.
Take a recent case in California. The owner of a payment processing company there was charged with fraud for allegedly working with payday loan merchants to make unauthorized withdrawals from customers’ bank accounts.
Loan business a ruse
Here’s how the scam worked: In applying for online payday loans, people would fill out applications that asked for their banking particulars. That was the whole object of the ploy. They were after the banking digits. The loan business was a ruse.
Once they got their hands on account information, they would send it to the guy in California, who is accused of processing bogus withdrawals from the bank accounts of loan applicants.
That gave the online merchants a way to put their hands in the pockets of innocent consumers, who probably badly needed money or why else would they pay the high rates charged by payday loan sharks?
The key to the swindle was something called a demand draft, also known as a remotely controlled check. These can be honored without the signature of the account holder.
An abuse of the system
The California connection kept a fee for his part in this abuse of the banking system and gave the rest of the proceeds to the website operators.
He also coached his accomplices on how to stay off the law enforcement radar and look like legitimate businesses to banking regulators. One trick was to change the name of the online business on a regular basis to stay one step ahead of the police.
Weren’t there red flags raised along the way? Sure there were. But the crooks used banks that were willing to look the other way and keep their mouths shut in order to get the business.
Each unauthorized withdrawal was fairly small, a few hundred dollars, but there were so many of them that the thieves stole millions.
The takeaway from all this: Be extra careful when trying to get a payday loan. There are risks involved. Look for warning signs. And check your monthly bank statement for any irregularities.