Payday loan consolidation programs or loans allow you to combine all your loans into a single, lower interest loan.
However, you also need to watch out for payday loan consolidation scams.
Looking to consolidate your loans?
Don’t fall into another scam. We’ll help you pick a legit consolidation company that best suits your needs.
Are Payday Loan Consolidation Companies Real or a Rip-off?
There are certainly a few legitimate payday loan consolidation companies out there that genuinely help borrowers reduce their overall debt. On the other end of the spectrum, there are also payday relief companies that are scammers. And in the middle, you have debt consolidation companies that are legit, but don’t help as advertised for every situation.
Picking a consolidation company isn’t easy, but that’s what we’re here for. We recommend DebtHammer, which works with debts of all sizes and only takes on clients they can help.
If you’d like to talk to a human who can help you choose the best program for you, feel free to request a free consultation here and we’ll do our best to help.
5 Ways to Recognize a Payday Loan Consolidation Scam
1) Bad Better Business Bureau Ratings
The first place to go to see if a consolidation company is legit is the Better Business Bureau.
You should realize that not every company is going to have pristine reviews, especially in this industry. But a legitimate consolidation company or lender will at least respond and attempt to resolve negative reviews and complaints. If a business doesn’t bother to respond to disputes, or there are too many reports of scams, than run. This is likely a consolidation scam.
2) Are They Just a Middleman?
The payday industry is full of middlemen called “lead generators.” These companies don’t actually give out loans or consolidation, they just use internet marketing to capture contact information, then sell it to the highest bidder.
Usually these lead generation sites will advertise as if they are a company, but really are a referral service. For example, check out this disclaimer on Solid Ground Financial.
This doesn’t necessarily mean that they are a scam. But you need to vet the loan provider that you are actually dealing with. Do not trust these middlemen to vet them.
2) Tribal Affiliations
If you see the mention of any Indian/Native American tribe, you can rest assured that this is not a legitimate consolidation company.
Sometimes they will claim they have a “license,” but that license hasn’t been granted to them by the government. It’s granted by the Indian Tribe.
Be sure to Google the address as well. If it’s located on tribal land, find another lender.
Payday loan scammers often use “tribal immunity” to break the laws. If you see anything related to an Indian reservation, run!
3) No Real Business Records
If you can’t find any records of the business, it’s probably a scam, or, at best, a middleman. Any real business will have a physical address and an official business name, which you can use to look them up in whichever states they claim to operate.
Even scammers can get an LLC — it only takes 10 minutes to set up on Legal Zoom. So if any so-called consolidation company doesn’t have a business record, it’s a scam.
5) No Lending License
Not all payday loan consolidation companies offer loans, but the ones that offer debt consolidation loans are required by law to have a lending license. Usually there will be a license record on their website, but that can be faked. So go to your state’s licensing website and be sure you can look up the business name. Here’s an example for the state of Texas: https://occc.texas.gov/industry/regulated-lenders
No license? Probably a scam.
6) No Address
If you can’t find a physical address for the company, find another lender. It’s that simple. Any legit firm will have an address on their website. And of course, be sure to look this up on Google maps as well. No address? Probably a scam.
If You’ve Already Been Scammed
If you suspect you’ve fallen victim to a loan scam, contact local law enforcement as quickly as possible. Also notify your state’s attorney general and, if the company operates in another state or outside the U.S., alert the FBI. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) also will be helpful allies
The Bottom Line
Consolidating your payday loans is a good idea, but beware of debt consolidation scams. They’re around every corner. But by following these guidelines you’ll be able to spot the red flags and protect yourself.