Paying, and paying, and paying payday loans

If you don’t have the cash or credit to cover a financial emergency, you might be thinking about getting a payday loan. But some payday lenders are not honest about how they collect on those loans and take more payments than they said they would.

The FTC sued Harvest Moon and other online payday lenders for their alleged practices in extending high-fee, short-term “payday” loans. In websites, telemarketing, and loan agreements, the companies told people they would repay a set amount with a fixed number of payments withdrawn from people’s bank accounts. But, instead of doing what they said they would do, these companies kept people on a costly treadmill — repeatedly taking money from their bank accounts, paycheck after paycheck, without ever reducing the amounts they borrowed. As a result, some people wound up paying around $1,200 for, say, $250 loans, says the FTC.

What’s more, the companies allegedly debited bank accounts without notifying people and getting proper authorization. The FTC also says that the companies did not give people clear and accurate information about the loans’ key terms, and unlawfully took remotely created checks after selling loans via telemarketing. And when people tried to get copies of their loan agreements or talk to someone about the payment terms, the FTC says the companies made this virtually impossible. In many instances, people had to close their bank accounts to get the payments to stop, according to the FTC’s case.

If you need cash quickly, remember that payday loans are often short-term, high-cost loans. Learn how to manage debt and budget for emergencies. And report it to the FTC at ftc.gov/complaint if a payday lender tricks you into paying more than it led you to believe.

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