Why Payday Loans Suck
I was a Wall Street investor for many years and in 2008 was approached by a payday loan start-up to be a seed investor. Now you would think I would knowledgeable about this industry but that was far from the case. I'm almost embarrassed to admit it but I let this "start-up" butter me up with talks of huge returns and how "they" were helping those in need. In the back of my mind I knew the deal felt "dirty" but the potential to make money was to great.
Spring of 2009 my seed money was used to open one store front and to create an online presence. These guys knew what they were doing because almost immediately royalty checks started to roll in. By 2011 my full seed had been paid back and I was a percentage owner in the company which was going at a staggering rate. Life was great financially but I always had that little voice in the back of my head saying "this just isn't right".
2013 rolled around and I couldn't sit on the sidelines any longer. I had collected a staggering amount of money from this deal, the profitable deal I've had to date. That's awesome you say but my conscious told me otherwise. Around this time the payday loan industry had begun to crack down heavily so I decided it was time for me to bail.
I exited the company collecting another hefty sum (7 figures) which I felt so bad about I donated it all to a charity I support. I'm not writing this for pity because I clearly don't deserve it. I guess I'm writing this to make myself feel better in a way, which I know is odd. Hopefully some of the information I will share here will help guide others away from payday loans or at least help them understand exactly what they're getting into.
Payday Loan Poll
Have You Taken Out a Payday Loan?
Aggressive Payday Loan Tatics
The image above actually doesn't represent the typical payday loan business owner well at all. Believe it or not most of them are from eastern countries and spend most of the day sitting by their pool.
Upfront the payday lending process seems innocent enough but that doesn't last long. Once you're on the hook the feeding frenzy begins. This is a good resource for predatory lending facts http://www.aboutpayday.com/. The lender has access to automatically withdraw funds from your account on your next pay period whether you like it or not. And that $150 lend you took out will cost you about $300 just a couple weeks later.
If you don't have the funds in your account the lenders have no problem rolling it over so they can double your interest. That $150 loan you took out will now cost you close to $600 one month later. Don't have the money to pay now? This is where it can cross the line.
I've seen some lenders put the borrowers account into a negative balance. I've seen lenders make threatening phone calls ranging from legal action to physical harm. Yes you read that correctly. Then there is the spam to your inbox and onslaught of phone calls.
Has a Payday Loan Lender Spammed You by Email?
Difference Between Payday Lenders and Payday Affilates
To be honest it doesn't really matter if you take a payday loan out through an affiliate or the actual lender because you'll end up in the same crappy place either way. Most affiliate websites will try to disguise themselves as the actual lender which breaks all kinds of local and federal laws. The reason they can get away with it is because there is no real way to police the Internet.
An actual payday lender website such as https://www.checkngo.com/ has to publish their lender licence numbers and the states they are allowed to operate on their website.
Next on the food chain is the actual affiliate type website which should clearly state they are not an actual lender and only provide a matching service. When you see the words "matching service" you can bet with 100% certainty it's an affiliate website. On this website https://www.landmarkcash.com/ will see that term several times throughout the content.
Last we have the affiliate payday loan website that tries to trick the consumer into thinking it's the actual lender. The reason the website owner does this is because it will help him convert visitors into customers. I don't want to give an example of this type of site because I don't want to give them any more attention. Most of these websites only last a few months online then have the plug pulled only to pop up on a new domain.
How a Typical Payday Loan Affiliate Program Works
- Affiliate builds website
- Affiliate hosts their own payday loan form or gets one from the lender
- Applicant completes payday loan application
- Applicant details are sent in real time to affiliate
- Affiliate has a system in place where payday lenders bid for your application
The reason you see so many payday loan affiliate programs and websites online is because it's very profitable. The company I was involved with would pay an affiliate between $20 and $210 per qualified application. The criteria that determines a qualified application varies but it's everything from credit score to current outstanding debt. We had affiliates making $20,000 plus per day at the peak in 2012.
The last bullet point where I mentioned bidding for your application is the reason you will receive a ton of spam once you apply for a payday loan. Your application is not sold just once but many, many times. When you complete that application you give connect to be ambushed by as many phone calls and emails as "they" want to send. Your details will remain on file and be resold for years to come.
I mentioned this website earlier but here http://www.aboutpayday.com/payday-lending-process/ is pretty good explanation of the process. Before I forget this http://www.responsiblelending.org/ is another good resource for payday loan information.
Questions About Payday Loans
I didn't go into great detail here because I'm not sure how much interest this will generate. I am open to answering questions and digging into this deeper if anyone would like to ask.