Power Up Against Payday Loan Scams: Protect Your Money

Life can throw unexpected challenges our way, and sometimes, we need a little help to get by. In moments of financial stress, many people consider payday loans to bridge the gap. Unfortunately, some of these offers turn out to be scams that make things worse. Payday loan scams are becoming a serious concern, frequently targeting families and individuals who are just trying to make ends meet. Luckily, staying informed and knowing the signs can make all the difference! This guide covers everything you need to know about payday loan scams and protecting yourself from financial harm.

What are Payday Loans?

Payday loans are short-term, high-cost loans that are meant to provide temporary financial support. The idea is that you borrow a smaller amount of money—typically $500 or less—and pay it back quickly on your next payday. That’s where the name comes from.

Payday loans themselves are not considered “scams.” However, they are seen as predatory due to their sky-high interest rates, tough repayment terms, and costly fees. Even legitimate payday loans can put you in a cycle of debt, which is why they are banned in many states in the U.S.

What are Payday Loan Scams? 

What’s the difference between payday loans and payday loan scams? Payday loans are risky yet legitimate, but payday loan scams are designed to steal from the financially vulnerable. These scams start online, and fraudsters reach out through ads or emails. They promise fast access to money without credit checks or employment requirements.

Once victims show interest in getting a loan, the scam can unfold in a few different ways:

In the first scenario, after initial contact, the scammer requests an upfront “processing fee” to cover insurance, administrative costs, or application fees. They use pressure tactics, insisting that the loan can only be approved if the victim pays straightaway. Once the victim sends the money, the scammer cuts off contact, and the promised payday loan never arrives.

The second version is similar but occurs a bit later in the scamming process. The fraudster first collects personal and financial information after the victim shows interest. Then, they initiate ACH credits or perform a mobile deposit into the victim’s account. While ACH transfers are typically legitimate, in this scam, the funds are likely stolen or fake creating a false sense of security in the victim. After the scammer tells the victim to return part of the money as a processing fee, they disappear with the funds.

Both methods prey on financial vulnerability and take your hard-earned money, ultimately leaving you in a worse financial situation than where you started.

How Do I Recognize Payday Loan Scams?

Protecting yourself means being aware that something isn’t right. Here are some red flags to watch out for:

• Payday Loans without Credit Checks: Be very cautious of “guaranteed approval.” Reputable lenders will always evaluate your creditworthiness before approving a loan. If it sounds too good to be true, it probably is!
• Upfront Fees: Fake lenders may ask for advance payments for insurance, processing, or application purposes. As we covered earlier, scammers will take that money then disappear before you receive funds.
• Unexpected Offers: Be wary of unsolicited loan offers you receive via email, phone, or online ads. Real lenders typically do not contact potential borrowers in this way. If you receive unexpected solicitations for payday loans online, it’s smart to ignore them and thoroughly research before engaging with any lender.
• High Pressure Tactics: Scammers create a sense of urgency, pressuring you to act quickly to secure the loan. They may claim that the offer is only available “for a limited time” or that you need to act now to “avoid missing out.” Always remember that legitimate lenders will provide you with plenty of time to review the loan terms and make an informed decision for your family.
• Request for Personal Information: If a lender asks for sensitive financial details before providing any loan documents with you, it’s a big warning sign. Reputable lenders only request this information after you have reviewed and agreed to the loan terms. Sharing your personal info too early can put you at risk of identity theft and financial fraud.

I Got Scammed, What Should I Do Next?

Discovering you have been targeted by a scam can be upsetting and frightening. But taking action quickly can prevent further harm. Here’s what to do during a scam:

• Secure Your Accounts: Change your passwords and security questions for your bank accounts and any other important online accounts.
• Contact Your Bank Immediately: If you have shared any financial information or if there was a suspicious deposit, reach out to your bank right away. (Contact information for Armed Forces Bank is provided below).
• Keep Records: Save copies of all communication you had with the scammer—emails, texts, screenshots of ads, etc. This information can be helpful when reporting the scam.
• Report the Scam: File a report with the Federal Trade Commission and Consumer Financial Protection Bureau (the FTC and the CFPB). Your report will help these agencies track scams and protect others.

Armed Forces Bank: We’re Here for You

At Armed Forces Bank, we‘re committed to the financial well-being of our military community and every family within it. If you have questions or feel worried about a potential scam, please don’t hesitate to reach out! Our military bank stands ready to help you navigate these challenges.

How to report fraud to Armed Forces Bank:

• Option 1: Log into your Mobile Banking¹ or Online Banking account and send a secure message via chat.
• Option 2: Visit afbank.com and click on the chat bubble in the bottom right corner. Request to speak with a banker, available Monday - Friday, from 8:00 AM - 10:00 PM, Central Time; AND Saturday, 9:00 AM - 5:00 PM, Central Time.
• Option 3: Call the Armed Forces Bank Client Care line at 888-929-2265, Monday - Friday, 8:00 AM - 7:00 PM, Central Time.

FINANCIAL EDUCATION: Scams & Fraud; Preventing ID Theft; Reporting ID Theft; Fraud Alerts & Freezes; Mobile Security Tips; Visa Card Security; EMV Chip Technology.

FRAUD-SPECIFIC ARTICLES: General Cybersecurity; Common Scams; Safe Checking Practices; Military Scams; SIM Swap Fraud; Phishing Emails; Phone Scams; Text Scams; Pig-Butchering Scams; Crypto Investment Scams; Elder Financial Abuse; Business Fraud; Tax Return Security, Phone Upgrades.