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Mainstream Scams To Avoid
Mainstream scams are services and products that overcharge the customer, are pushed onto unwitting people, or utilize various forms of trickery to separate people from their money while having a tendency to not be readily seen as the scams they are. While they may often be targeted towards those with low-income, increasingly middle class and other Americans are feeling the sting. No matter what the customer's economic background is, these "services" leave a lot to be desired by the consumers and communities in which they are located. People seek these options out when they believe they have no other options and because they do not take the initiative to inform themselves as to the true cost.
The only defense is being an informed consumer, it is that simple. It doesn't pay to stick your head into the sand and just go with what you are told by others, particularly those who offer the service or products. It also does not pay to have an "I can't wait" attitude when making purchases or obtaining any type of loan. What you pay for in convenience or ease in getting can have a high price later.
Rent To Own
Rent to own offerings have been around for years and since the start of the recession rent to own options have become more widely used. When consumers have more disposable income they don't even think about rent to own companies, for good reason. So who are these companies targeting? Those struggling paycheck to paycheck and those who don't have the ability or discipline to save up for purchases such as furniture, computers, or household appliances.
By the time the customer finishes making payments and actually owns the item(s), it is then that they realize they would have been able to save all that money and purchase a better quality or more advanced item than what's found at rent to own companies. For many, the weekly or bi-weekly payments seemed minor but turned out to be more of a pain than they anticipated. The type of products that the company offers make no difference, rent to own and layaway electronics from companies that advertise on t.v. and online are equally bad as rent to own store payment plans.
The price of these items is higher than what's found in regular stores that don't offer rent to own plans. Also, rent to own companies charge fees on top of this, increasing the price for what are often considered lackluster products that have fewer benefits and features than current models found at regular stores. Rent to own company product offerings are often made with low quality standards. In cases where the brand names at rent to own stores may be well known, the actual products are current in their features and are the lowest quality/priced items the rent to own company could get their hands on to mark up and sell to customers. Some rent to own companies also sell and rent used items yet the customer must pay inflated prices as if they were getting a brand new product.
It's best to work within your budget and that budget should have a portion earmarked for savings and an emergency fund. If you think that you'll need a computer, furnishings, or appliances, begin saving the money in a bank account BEFORE you need it, under your mattress, or even in a jar if you have to. If you can, go without it for a while. Not having every single room fully furnished will not kill you, but the debt that you could find yourself in could do you great harm. You will save yourself fees and interest by planning, saving, and choosing wisely. Also, you will be able to buy something that is better quality, longer lasting, with more features, and without extra fees on top of an artificially inflated price.
Substandard For Profit Colleges
These "schools" are notorious for advertising, calling, emailing, and otherwise harassing "potential" students into choosing them. The majority of for-profit schools that are owned by companies use deceptive and relentless tactics to get students to enroll. So many do so that they have tainted the image of an entire industry. Many of these types of schools make the effort to present themselves as offering the same level of education and internships as reputable schools whose credits transfer to other reputable schools.
To their detriment, many students fall for this presentation due to the school's advertising or through misleading in-person communications with staff members who are often paid via commission. In addition, It is common for unethical for profit colleges to hide the true costs from students by intentionally using vague language or simply changing the subject when asked.
A recent change requiring for profit schools to receive at least 10% of their funds from sources other than the US government is being flouted by many of these sneaks. Because substandard for profit schools heavily depend on enrolling students who get their financial aid from the government in the forms of loans and grants, the new policy was put into place to keep some of their students out of debt they cannot afford and to keep billions in government funds out of greedy corporations' hands.
For profit colleges run by companies labor to get students' government financial aid and inflate their prices to max out each student's loans and grants and pocket the money. LESS THAN 20% of the billions received by substandard for profit colleges is actually spent on educating the students in any way. Let me be clear, these billions of dollars in government loans and grants being paid to these for profit colleges are TAXPAYER DOLLARS. Much of the money is being spent on the t.v. and online ads that have become commonplace and commissions/bonuses being paid to recruiters and other staff.
These schools are now using their deceptive and relentless contact methods on our U.S. veterans to get around this ruling. However, anyone with a brain can easily see that veterans use their educational benefits provided by the U.S. government and the substandard for profit schools are simply continuing their unethical behavior for the sake of profit while putting students deep into debt that is usually not serviced by any jobs they get. In fact, the majority of these students don't land jobs in the fields they studied at substandard for profits. These types of schools have horrific graduation rates and very high numbers of students who default on their loans.
Students should inform themselves, because they are the consumer in this situation. As a college student, it's up to you to take the initiative and investigate thoroughly. Think about the fact that if you're being hounded with emails, phone calls, texts, direct mail, etc., they want something from you and it is money. Further, if they do not clearly state their prices and all semester schedules in print as you'd find at a reputable university or college, you should avoid them at all costs. Recruiters at these schools often don't mention pricing details that if provided would often make students decline enrolling at their schools. Their tactics of getting students to choose them are unethical and in some cases, illegal.
While there is talk of reform and class action lawsuits, these things take years if they happen at all. Judging by their deep pockets (billions paid by TAXPAYERS), it will be a very long time before these practices and types of schools are reformed or shut down. When you understand that many of the for profit colleges you see advertised on t.v., and online are in fact companies in business to earn money (basically from the US government), it will be easier to see why and how hard they'll fight for their piece of this billion dollar pie. In the meantime, make sure that you and your loved ones don't fall for this overpriced and lackluster "education."
Title loans are a bad idea because of the high interest rates. Also, the fact is that these loans trap people in a cycle of debt. Most title loans have rates exceeding several hundred percent and many are never repaid because the borrower finds out too late that they have to dip into their living expenses to pay it off. Unfortunately, many title loan borrowers get trapped on a debt treadmill where they can only pay the interest in order to keep living paycheck to paycheck.
Title loan companies are being driven out of some states. In Virginia, there are some cities and counties that frown upon these establishments and have banned newcomers. In a number of areas they are withering and closing up shop thankfully. However, one title loan company has taken to marketing themselves on t.v. as a lifesaving option. The commercial shows a woman crying because her dog needed to go to the vet and she had no money but put up her car as collateral and got a title loan. The sentiment in the commercial is summed up by her saying thank GOD for her title loan or poor Fido would not have gotten the care he needed. Fortunately for many the advertising doesn't work to change their views of title loans. For some people, advertising may actually draw them in if they are uninformed as to the true costs with triple digit interest rates.
The only way to avoid title loans is by choosing to do so. Even if you feel like you have no other options, there may be. First off, saving even a few dollars for your own emergency fund should be a priority for any working adult. Even if you work at a minimum wage job, save something from every pay period to get into the habit. Saving is a habit that may literally save your arse. While it is best done from an early age, it's never too late to start! Emergencies are always worse when you have nothing saved. If you have even a small financial cushion, let alone enough to cover an unexpected expense or two, you'll save yourself a great deal of stress and you will be better able to weather the storms of life.
Secondly, you may qualify for a loan with favorable interest rates at a bank or credit union. Perhaps you have something of value sitting around unused that you could sell. Even swallowing your pride and asking a family member for help would be better than going to title loan companies where you'll typically pay 3 or 4 times the amount that you borrowed. If you don't pay up, you will have your car repossessed. You will then be worse off than you were when you applied for a title loan.
Payday loans are not much different than title loans where interest and other fees are concerned. Payday loans use the borrower's personal check as collateral and the lender has the ability to debit the borrower's bank account for principal, interest, and any other applicable fees. Typically the loans must be paid within two weeks to thirty days. The interest and fees are exorbitant in the overwhelming majority of payday loans and the short terms on these loans is what locks borrowers into debt.
If the payday lender is unable to charge their preferred high interest rates in the triple digits, they end up closing up shop. Fortunately, this is occurring more frequently due to the increasing prohibition of these types of businesses but there are still many thousands of them across the country and online.
The larger the loan, the more likely it is that the borrower will only pay the interest or a renewal fee to keep the loan from going into default. However, there are many people who borrow amounts as small as $100 - $400 who become locked into a cycle of debt with payday loans. It is not uncommon for borrowers to end up having their checking accounts overdrawn and shut down when they can't pay. Bankruptcy is also another possibility for those who find themselves unable to repay their payday loans.
In the majority of cases where a consumer gets this type of loan, they sink into debt when they initially thought the loan would help them out of a bind. Paying off payday loans becomes too difficult without neglecting other responsibilities such as housing, utilities, or groceries. Similar to title loans, some cities, counties, and states are working on eradicating them as this "service" often leaves the customer in worse shape than they were before.
Consumers who try getting a payday loan by going to a website are often surprised by the amount of junk mail, texts, and telemarketing they receive. Because they provided their info to a website (or several) that sells and shares all the banking and contact info they provided, some of these borrowers actually get money taken out of their account for things they never agreed to by unscrupulous "lenders" that bought that borrower's banking and contact info. This is reason enough not to trust online payday loan lenders.
Make the right choice and bypass payday loans because they are lackluster "options." Eventually payday lenders will be forced to create more value and benefit to the customer at a fair price or they will be forced to close up shop and disappear.
Center For Responsible Lending
- Center for Responsible Lending
Helping American families build wealth by promoting fair financial practices. We offer research, policy and legal solutions, and consumer tips.