Payday loans provide essential access to necessary funds for some of Canada’s most vulnerable residents, but sadly, predatory companies are working to exploit those most in need of fast cash. Payday loan scams are on the rise, so Magical Cash is here to help you recognize the legit from the counterfeit and to keep you and your money safe.
Scam or Safe: Upfront Fees
One of the most common payday loan scams come from companies that appear normal in many ways, but that ask for payment upfront, usually to cover “fees”. Some of these fees may sound very standard: administration fees, application fees, processing fees, and so on, but the reality is that it’s illegal in Canada to request any form of payment before a loan is paid out. These scammers collect fees, never give out any loans, and disappear with the money. A reputable payday lender will never ask for money upfront, for any reason.
Scam or Safe: Guaranteed Approval
Another common scam is to “guarantee” loan approval. It’s no secret that payday loans are easier to get than other types of loan, but legitimate companies cannot guarantee approval. Even when credit checks aren’t required, lenders need to assess income and verify identity before they can approve a loan application. So any company that promises approval before you have provided any information is extremely suspect; the likelihood is, they are trying to entice you in, and then hit you with excessive fees or interest charges.
Scam or Safe: No Terms and Conditions
Any trustworthy payday lender will be clear about their terms and conditions; it’s the law. They’re required to provide detailed, transparent information on their interest rates, fees, repayment schedules, payment methods, and data security measures. Confusing small print, incomplete terms or no terms at all are a telltale sign of a scammer – someone who wants to behave in any way they like without reference to a legally binding document.
Scam or Safe: Patchy Company Data
A reputable payday lender will have complete company data that is easy to find on their website (e.g. under “Contact Us”), and that can be cross-referenced elsewhere. This should include a real, verifiable address within your province (that does not come up as the address of another company and is not just a P.O. box), an email address and phone number, and a social media presence. If you can’t find these things, chances are the company isn’t real.
Scam or Safe: No Customer Reviews
Another quick way to detect a scam is to look for past customer reviews online. A legitimate, established company will have plenty to choose from over an extended period of time. A company with only a couple or only very recent reviews is more suspicious.
Scam or Safe: Fake Online Forms
The rise in online payday loans has led to a new type of scam: fake online forms. You probably already know to be careful about your banking details online, but many people happily give over this information when they believe they’re providing it for the deposit of payday loan funds. But here’s the problem: scammers use genuine-looking forms asking for your bank account details, and then use this information to enroll you in a suspicious program. It’s just a way to gain access to your bank account. To avoid this, always thoroughly check a payday company’s website and its security systems before providing any sensitive data. A good lender will use a widely known, reliable system like Instant Bank Verification.
Scam or Safe: Aggressive Collection Tactics
There are strict rules about how and when a payday lender can pursue a borrower for non-payment of their payday loan. So, anyone becoming aggressive in pursuit of any debt, whether new, old, already paid, or outstanding, should be viewed skeptically. Threats of legal action and damage to credit, and fake debt collectors put pressure on a borrower and are designed to make them act rashly. But always verify the validity of anyone pursuing you for money. And remember that payday lenders are not allowed to contact your employer or garnish your wages in pursuit of repayment.
Scam or Safe: No License
A lot of these scams can easily be avoided by remembering one key fact: payday lenders are regulated provincially and must be licensed. You can check a payday lender’s license with your province’s Consumer Protection or Business Bureau. Every province also has regulations regarding maximum loan costs, repayment terms, and borrowers’ rights. Match these against a specific lender to see if they’re honest or not.
If you need access to cash fast but want to stay safe, consider applying with Magical Cash; we are completely transparent about how we work and won’t come with any nasty surprises!
