When the Online Lenders Alliance formed in 2005, the first step was to eliminate the ‘bad apples’ and standardize the principles by which loans should be made. This was done so that when customers see that you belong to Online Lenders Alliance (OLA), they know they will not only get financial relief but that they are doing business with a reputable company that adheres to good business practices and principles.
But who are the good apples who belong to the OLA? The OLA’s site provides no details on membership, and one can find many online payday lenders that mention the Alliance. It’s not hard to find an online payday loan. Online lending is a growing part of the payday lending industry, with $7.1 billion in estimated loan volume for 2008, compared with $35 billion for storefronts, according to one estimate.
David Redford,a victim of the online loan sharks, told the Huffington Post he took out a $500 online payday loan in late 2007. He said he still didn’t have enough to keep ahead of the $950 monthly rent on his family’s home in Virginia and the utility bills, car payments, and other expenses. It wasn’t long before he went online to take out another loan, and another, and another. Every couple of weeks,he would take out a new loan to pay off the old one.
Although he made minimum payments every other week, which started at $75 and eventually reached $250, he never dented the principal they owed. A year after taking out his first loan, Redford owed hundreds of dollars to each of at least six lenders, including capitalfunding.com, paydayloanyes.com, papercheckpayday.com, cashtransfercenters.com, and upfrontmoney.com. Bank fees piled up as the lenders siphoned money from his account. He was eventually all drowned up in overdrafts, but did not know whether it was legal or not.
It certainly was illegal, but he couldn’t find any person who owned those websites except one. But Redford’s contract with upfrontmoney.com stated that the company "is not in the business of making any type of loan", instead, it provides a big cash rebate after the customer purchases a prepaid phone card. Warren didn’t put too much effort into the it’s-a-rebate-not-a-loan argument, a typical sham, according to the Consumer Federation of America, before forking over $6,000 in a January settlement.
The end result is that should be very careful when getting a loan from an online service as you never know who’s at the other end. Try to make sure they are authentic and reliable before entering into an agreement with them.
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