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Online payday lenders often take advantage of consumers

It will be an exercise in patience for Washington, D.C., residents to rebuild credit after filing for bankruptcy, but it is possible. Some people who are eager to move on with their lives may be tempted by the promises of easy money or a quick loan by those who prey on people recovering from bankruptcy. It is important to realize that these predatory lending practices, such as payday loans, are almost never a good idea for those who are going through debt recovery – or for anyone.

According to U.S. News, payday lending centers are notorious for making it difficult, if not impossible, for consumers to repay a loan in a timely or affordable fashion. They are known for aggressive, abusive and even fraudulent collection practices and astronomical interest rates. Because of all of these problems, payday lending centers are illegal in 14 states and the District of Columbia. However, that has not stopped many online payday lenders from taking advantage of consumers on the Internet, even in states where the practice is outlawed.

The tactic of many payday lenders is to require direct access to a customer’s bank account. This enables them to automatically withdraw a loan in full. They may attempt multiple times to debit an account, causing overdraft fees that pile up on the customer. Customers may then face the hardship of not having enough money to pay rent, utilities and other necessities.

The Federal Trade Commission has filed lawsuits against several of these online payday lenders. Some reportedly threatened to have customers jailed for not repaying their loans. Others repeatedly charged exorbitant finance fees to customers’ bank accounts, resulting in charges that were many times more than the amount of the original loan.

The FTC recommends that people wisely manage their consumer debt when rebuilding their credit. Instead of a payday loan, it may be more effective to talk to a credit union about taking out a small loan or to shop around for credit cards offering the lowest interest rate. It is also a good idea to save a small amount each paycheck so emergencies can be covered, rather than turning to predatory payday lenders for help.

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