Tuesday, July 25th, 2017

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Common Deceptive Credit Practices

Don’t Be Lured By High-Interest Loans or Scams

Deceptive or misleading practices are everywhere. Their aim is to make you pay more than you should for goods and services, or make you pay for things you don’t need. Whether through misleading advertising, wrong assumptions, or outright lies, the result is the same: you may pay more than you should for what you get. Here are some common deceptive practices:

Payday loans

A payday loan is a short-term loan in which the consumer writes a check to be deposited later in exchange for cash now. Even if you need the money for bills, you’d be better off NOT getting this loan. The transaction includes a "small fee"– usually $15 or more for every $100 that you borrow. The problem arises when the loan is due. If you can’t pay off the loan, you must renew it and face additional fees. By rolling over this loan for a small fee each time, you end up paying incredibly high annual interest rates (300 to 500 percent APR). You’d pay less in credit-card late fees than what it would cost for accumulated payday loan fees.

Title loans

A title loan is a short-term, high-interest loan (200 to 300 percent APR) that uses your car as collateral. If you don’t repay the loan on time, the finance company can — and likely will — repossess your car. The finance company may try to sell your car to get the money you owe on the loan. And if they don’t get enough money from the sale, you’ll owe the title loan plus your original auto loan. Avoid title loans because they put your property at risk and charge exorbitant interest.

Credit card loss protection insurance

Credit card loss protection insurance is an unnecessary cost to the consumer. Keep in mind that federal law limits your liability for unauthorized credit charges to $50 per card, with proper notification to your card issuer. The Federal Trade Commission cautions you to avoid doing business with telephone callers who claim that:

  • You’re liable for more than $50 in unauthorized charges to your credit account.
  • You need credit card loss protection because hackers can access your credit card number and charge thousands to your account.
  • They’re from "the security department" and want to activate the protection feature on your credit card.

If you see an unauthorized charge on your credit card statement, don’t pay it. Contact your card issuer and follow their procedures for disputing the charge. Also, make sure not to give out your credit account numbers or other personal information over the phone or online for any service or product you didn’t request. If you have questions or want to file a complaint about a scam, contact the FTC toll-free at 1-877-382-4357 (TDD: 202-326-2502), or online at www.ftc.gov.

125 percent loan-to-value home equity loans

125 percent loan-to-value home equity loans. These loans require you to put up your home as collateral. So, if you can’t make your original mortgage payment, the mortgage lender will foreclose and sell your home. Even if the sale covers 100 percent of your home’s value, you’re stuck paying the difference up to the 125 percent home equity loan. Beware of ads like, "NO EQUITY, NO PROBLEM!"

Many other deceptive practices exist, such as high-pressure sales tactics that rush you into signing a contract before you have time to think it over. Know that if they’ll lend you the money or sell you the goods today, they’ll do it tomorrow. And remember the old axiom, "If it sounds too good to be true, it probably is too good to be true." Remember to always read the fine print and understand what you’re getting into.

The lender may not come out and tell you everything, but by law, the contract must spell out the following: What happens if you don’t pay, how much the loan actually costs, and your rights as a consumer.

© 2008, Young Money Media, LLC. All rights reserved.

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5 Responses to Common Deceptive Credit Practices

  1. Payday Loan Advocate says:

    The current presidential candidates, Barack Obama and John McCain, supported an anti-payday loan bill in 2006. The bill, which took effect in October 2007, put a 36 percent cap on the interest rates that payday loan stores charge military personnel. The basis behind the bill was the increasing number of American soldiers that found out that loans had been taken out in their names without their consent. Many of these loans were either given to identity thieves or to their spouses. More often than not, the loan recipients borrowed money, but did not repay the loans. A majority of the loans should never have been approved in the first place because the applicants didn?t meet the qualifications. Military personnel as a whole are generally considered low-income and sometimes, unfortunately, considered to possess very little financial knowledge. The government wanted to prevent identity theft of military members because it would also prevent security breaches. Therefore, the government ruled in favor of the measure. Barack Obama would like to employ the measure nationwide. If the same interest cap is imposed throughout the U.S., the payday loan industry will be wiped out. Take time to think about who you?re voting for because your financial liberties are at risk in this election.
    Post Courtesy of Personal Money Store
    Professional Blogging Team

  2. Payday Loan Advocate says:

    House Bill 545 has taken comfort in the mind of Ohio’s governor, Ted Strickland. He is on the move to convince people in his state to vote in favor of the bill. Ignoring the voice of the people earlier this year, this bill will put a cap on the annual interest rates that no fax payday loan companies can charge to 36 percent. Now let?s review this situation in a bigger picture. This would mean the payday loan industry will make virtually no money at all, which will eventually drive the whole industry out of the state. No company can survive under these conditions. To make matters worse, presidential candidate, Barack Obama, has vowed to impose Strickland?s interest rate cap nationally. This will mean that people will have fewer options making ends meet in tough times. If this bill should be passed, what then do they offer the people in return when life throws one of its little surprises? Before casting your vote, think about the dreadful consequences.
    Post Courtesy of Personal Money Store
    Professional Blogging Team

  3. Payday Loan Advocate says:

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  4. James Stilwell says:

    A close friend of mine made the mistake of taking out a loan thrugh one of the payday type loan services. He used the title of his truck as collateral. The interest adds up to about 28.00 dollars a day. Because of an issue with his job he did not receive his check for three weeks and he could not pay his note to the Loan Shrks. He now owes almost 2000 dollars more than his loan. There should be a law against this and I will be standing in the Courts to promote a limit in all States to prevent this from happemning to hard working citizens.

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