Cash advance Loan Lenders Getting More Clever

Legislators all over the country have begun to crack down on the business of quick cash loans. They are expensive, they are tough to pay off, the terms are frequently complicated, the lenders are not especially sympathetic, and the businesses seem to prey upon those who can least afford misfortune - the poor and enlisted military personnel.

Cash advance loans are short term cash loans offered at a seemingly insane interest rate that averages 474% nationally. The payments are due, in full, in two weeks. If they are not paid promptly, the interest continues to pile up. There are plenty of stories of individuals who have borrowed a couple of hundred dollars, repaid several thousand dollars in interest, and were still sued over the unpaid loan balance. Because of the negative press that these businesses have been receiving, several of them have been trying to hide themselves while doing business under a seemingly unrelated line of work.

Here is an example:

A company doing business at the now defunct Website Acepays.com was offering loans of as much as $1000 disguised as “memberships.” The scheme was that individuals could become “members” of their Website and get discounts on merchandise offered for sale by the company. There were seven different memberships offered and each one promised larger discounts than the level below. The highest level, the “diamond” level, offered discounts of up to 60% on products and included a “cash rebate” of $1000.

Now why would anyone sign up and pay regular fees in order to get a cash rebate? The plan worked like this - A person agreed to join, had regular payments for the “fee” deducted from his or her charge card, and they then received the $1000 “rebate.” The problem, as the state of Pennsylvania saw it, is that the objective of the site wasn’t to sell goods at a discount; it was to offer the cash. There were a number of mentions on the site of how members could “get the cash you need now.”

The state thought of this as a high-interest loan business, and decided that the  rate of interest provided by the company on their “rebates” was in excess of 600% annually, a rather large amount in light of Pennsylvania’s legal limit of 6%. The Website is no longer on the Internet and the company has promised refunds to some of the customers who were overcharged.

A lot of of these companies are still in business, and consumers should beware of sales pitches that seem too great to be true. Joining a “membership” program for several thousand dollars in order to obtain a $1000 “rebate” isn’t a good deal; it is a total rip-off. Consumers should watch out, for there will be many more companies like this doing business on the Web soon.

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