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Payday Loans

Payday loans let you borrow relatively small amounts of money for a short period – from a few days up to a month, until you get paid the following month. Available from internet sites and high street shops, payday loans can be easy to get but interest rates are higher than with other types of loan – sometimes in excess of 2,000% APR (annual percentage rate). This means that you should think very carefully before committing to a payday loan and whether you can afford to repay it on or before the due date.

The most common repayment method is via your bank debit card, where you agree to let the lender take the money from your bank account, known as a continuous payment authority (CPA). If there are not sufficient funds in your account to repay the loan on the agreed date, the lender may keep asking your bank for all or part of the money, and will also add charges for late payment.

Payday loan fraud is also becoming increasingly commonplace, aided in some cases by seemingly inadequate security checks by certain lenders. Unless you can prove that it is not you who has taken out the loan, you may be vigorously pursued for the debt plus interest and possibly other charges.

The risks

Taking out a payday loan to ‘tide you over’, only to find that you are unable to repay the sum in full on the due date.

  • Taking out a payday loan to ‘tide you over’, only to find that you are unable to repay the sum in full on the due date.
  • Being attracted by the speed and ease of taking out a loan without considering the costs and risks, because you need the money so urgently.
  • Having to pay higher interest rates and arrangement fees to extend a payday loan.
  • Being chased aggressively for repayment by certain lenders.
  • Not being clear about the APR or actual monetary amount of interest that the loan carries.
  • Suffering from mounting financial difficulty and distress.
  • Not having any complaints you may have being dealt with in the correct manner by certain lenders.
  • A payday loan being fraudulently taken out in your name, and paid into the fraudster’s bank account.
  • A CPA being fraudulently set up against your debit card.

Advice on payday loans

  • Think carefully before taking out a payday loan and consider other ways to resolve your short or longer-term money problems such as a credit union loan, overdraft or the Social Fund.
  • Make sure you are fully aware of the terms of the loan including interest rate, repayment period and penalties for late or non-payment.
  • Shop around and compare the costs and conditions.
  • Be aware of your rights and where to go for help if you have a problem.
  • Be wary of extending a payday loan as it will inevitably cost you even more money.
  • Consider instructing your bank or card provider to stop the payment being taken before the due date, if you cannot afford to repay the loan.
  • Contact the Money Advice Service for impartial advice on credit and debt.
  • Contact Citizens Advice or another not-for-profit debt advice agency if you are struggling to make repayments and need help.
  • Always safeguard your identity online and offline to avoid it being stolen by fraudsters to take out payday loans and other transactions in your name.

If you are the victim of a payday loan scam

  • Check your bank transactions carefully and regularly so that you can find out as soon as possible if money has been taken from your account to repay a loan that you did not take out. If you spot any suspicious transactions, please notify your bank immediately, and the loan company involved.
  • Consider conducting a credit report search to establish if any other applications have been made using your details.
  • If you are pursued by a lender for a debt you do not owe, write to the lender and, where appropriate, the debt collection agency, making it clear why payment is being refused. If you do not receive a satisfactory response, complain to the Financial Ombudsman Service which provides free and independent dispute resolution.
  • If you think you have been a victim of fraud: Report it to Action Fraud, the UK’s national fraud reporting centre by calling 0300 123 20 40 or by visitng www.actionfraud.police.uk

    And always remember these security basics …

    • Use strong passwords. Never reveal your website access or online payment passwords to anybody.
    • If you think that any of your online payment accounts have been compromised, take action immediately. Check websites’ online help pages.
    • Be wary about clicking on links provided in unsolicited emails. For example, it is better to enter your bank’s website address into your browser directly, or use a bookmark that you created using the correct address.
    • If you pay by payment card, remember that a credit card offers greater protection than with other methods in terms of fraud, guarantees and non-delivery.
    • When paying either by online payment service or payment card, ensure that the link is secure, in three ways:
      • There should be a padlock symbol in the browser window frame, which appears when you attempt to log in or register. Be sure that the padlock is not on the page itself … this will probably indicate a fraudulent site.
      • The web address should begin with ‘https://’. The ‘s’ stands for ‘secure’.
      • If using the latest version of your browser, the address bar or the name of the site owner will turn green.
    • Always log out of sites into which you have logged in or registered details. Simply closing your browser is not enough to ensure privacy.
    • Keep receipts.
    • Check credit card and bank statements carefully after shopping to ensure that the correct amount has been debited, and also that no fraud has taken place as a result of the transaction.
    • Ensure you have effective and updated antivirus/antispyware software and firewall running before you go online

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Protecting Yourself 44