Common Deceptive Credit Practices
By InCharge Institute of America, Inc.
InCharge Institute of America, Inc.
Deceptive or misleading practices are everywhere. The aim
is to make you pay more than you should for goods and
services, or make you pay for things you don't need.
Whether it's misleading advertising, wrong
assumptions, or outright lies, the result is the same: you
may pay more than you should for what you get.
These are some common deceptive credit practices:
A payday loan is a short-term loan in
which the consumer writes a check to be deposited later in
exchange for cash now. Even if you need the money for
bills, you'd be better off NOT getting this loan. The
transaction includes a "small fee" - usually $15
for every $100 that you borrow.
The problem arises when
the loan is due. If you can't pay off the loan, you
must renew it and face additional fees. By rolling over
this loan for a small fee each time, you end up paying
incredibly high annual interest rates (300- 500 percent
APR). You'd pay less in credit-card late fees than
what it would cost for accumulated payday loan fees.
A title loan is a short-term,
high-interest loan (200-300 percent APR) that uses your
car as collateral. If you don't repay the loan on
time, the finance company can and will likely repossess
your car.
The finance company may try to sell your car to
get the money you owe on the loan. And if they don't
get enough money from the sale, you'll owe the title
loan plus your original auto loan. Avoid title loans
because they put your property at risk and charge
exorbitant interest.
Credit card loss protection insurance is
an unnecessary cost to the consumer. Keep in mind that
federal law limits your liability for unauthorized credit
charges to $50 per card, with proper notification to your
card issuer. The Federal Trade Commission cautions you to
avoid doing business with telephone callers who claim
that:
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You're liable for more than $50 in unauthorized
charges to your credit account.
-
You need credit card loss protection because hackers
can access your credit card number and charge
thousands to your account.
-
They're from "the security department"
and want to activate the protection feature on your
credit card.
If you see an unauthorized charge on your credit card
statement, don't pay it. Contact your card issuer and
follow their procedures for disputing the charge. Also,
make sure not to give out your credit account numbers or
other personal information over the phone or online for
any service or product you didn't request. If you have
questions or want to file a complaint about a scam,
contact the FTC toll-free at 1-877-382-4357 (TDD:
202-326-2502), or online at www.ftc.gov.
125 percent loan-to-value home equity
loans require you to put up your home as
collateral. So, if you can't make your original
mortgage payment, the mortgage lender will foreclose and
sell your home. Even if the sale covers 100 percent of
your home's value, you're stuck paying the
difference up to the 125 percent home equity loan. Beware
of ads like, "NO EQUITY…NO PROBLEM!"
Many other deceptive practices exist, such as
high-pressure sales tactics that rush you into signing a
contract before you have time to think it over. Know that
if they'll lend you the money or sell you the goods
today, they'll do it tomorrow.
Remember the old
axiom, "If it sounds too good to be true, it probably
is too good to be true." Remember to always read the
fine print and understand what you're getting into.
The lender may not come out and tell you everything, but
by law, the contract must spell out the following:
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What happens if you don't pay
-
How much the loan actually costs
-
Your rights as a consumer
