In this article we take a look at a particularly obnoxious payday loan “front” called “100-Day Loans.” Observe the techniques the company uses to lure people into the financial self-destruction of loan-shark-type interest rates.
PayDay Loans – a Prescription for Disaster
Before I get into a scam-analysis I want to tell you where a web-site like this leads: to a “payday loan,” which is a very short term, extremely high-interest loan. Payday loans can lead to your financial destruction remarkably quickly, with rates sometimes approaching 500%. While I was still practicing law I represented someone who had borrowed $500, had some unforeseen difficulties with paying back, and was sued for $12,000 approximately a year after signing the deal. Before I came on the scene her chance of paying that off was exactly her chance of winning the lottery.
My First Contact with 100 Day Loans
I received an unsolicited email from 100-Day Loans. It was, in other words, spam, with a by-line from “Loan Approval” and subject line saying “Need Cash Quick? Get up to $1000 Now (All Credit OK).” That sort of information probably tells you all you need to know, but there was much more.
When I opened up the email, I was greeted by the smiling photo of a woman wearing a low-cut top holding a lot of cash. Below that is a lot of very small print mainly talking about how fast and easy it is to get these loans, and how you can extend the time for repayment if necessary.
Not a worry in the world!
She isn’t worried about interest rates of 500%, but you should be.
Next Step: Get My “Approval!” for a Payday Loan
I clicked on the “Apply Now!” button for my instant approval and was taken to an application site where I was told I was “approved!” for the loan. At the top of that page was a timer which said I had a little less than ten minutes left on my approval. The application for the loan was about three pages long. Halfway down the page was a box of “terms and conditions.” These terms and conditions included about two pages of small print. Of course, most people, having only ten minutes to complete the application, would never read the small print. I did, and it contained some remarkable things. As I read through them, my ten minutes expired, and guess what? I got a pop-up box telling me my time has expired and asking me if I needed more time to complete the process. When I clicked “okay” I got ten more minutes.
What a surprise.
I won’t go through the terms and conditions attached to the loans. They were not intended to be read, and many of them seemed to be between 100-day Loans and someone else (I thought it might be part of an affiliate arrangement or franchise agreement). Let’s just say that if anything bad happens, it’s your problem. One particularly interesting part of the terms and conditions is known, in legalese, as a “non-disparagement” clause. Here’s what theirs says:
11) Non-Disparagement: 100 Day Loans, the Site, and the Service, value constructive criticism and comments of users. All comments should be submitted to 100 Day Loans by email at admin@100 Day Loans.com. While 100 Day Loans welcomes constructive input, negative comments and remarks made about 100 Day Loans serve no purpose other than demeaning, disparaging, and negatively influencing the goodwill and reputation of 100 Day Loans. Therefore, users must not disparage, demean, or make negatively influential comments about 100 Day Loans, the Service, the products and services offered, or any director, officer or employee of 100 Day Loans.
In plain English, they’re saying that you agree not to say anything “bad” about them – anything that might cause other people not to use their service. Although of course they welcome any “constructive” criticism. There is a small paragraph saying that if you breach this agreement you’ll be on the hook for attorney’s fees.
I Looked for Interest Rates – In Vain
I looked everywhere on the site – all the terms and conditions I could find, the Frequently Asked Questions area, – everywhere- for some mention of interest rates. I found only one, in the description of what the company does: they find the fastest, easiest loans at the “lowest available” rates, supposedly checking bank rates as well as payday loan shops.
How the “Scam” Works
100-Day Loans appears to be a front for loan sharks. They say they do not actually lend anybody any money themselves. Instead, they “match” loan seekers to loan suppliers. As I said above, they claim to check with banks as well as loan sharks, but I am skeptical of this claim – the application is too short and the processing time too brief for me to think they make even that pretense.
Notice the “instant approval” and the ticking clock at the top with less than ten minutes to go. Their ideal customer is probably well into frantically filling out the application for the loan by the time the site offers “ten more minutes.” (And, incidentally, it will renew the approval for another ten minutes every ten minutes until doomsday I would guess – although I only tried it for twelve hours.)
Obviously the site appeals to someone who wants money fast – the photo suggests it could be used for gambling debts, binge shopping, presents for promiscuous girlfriends, or the like. Our happy shopper above gets up to a thousand dollars through an approval process which can take “up to 90 minutes” to complete but will, after all that anxious waiting, deposit the money into your account ready to go in the morning. I take it that the “100 days of freedom” are the last you will ever have – the amount of time you have to pay off the loan. Fail to make that payment and you will get another 100 days to pay two or t
hree times as much.
Payday Loans Can Be Devastating
Notice that the site has no reference to interest rates or the unpleasantness of paying the money back. Questions like that apparently are not “frequently asked.” Or perhaps their answers would be too “negative.” No doubt the site owners would justify the complete lack of disclosure in two ways: since they don’t actually make the loans themselves they do not have to make such dis
closures – the company actually lending the money will presumably do that. And since they’re “shopping” the application around in a tireless search for the best rates, they cannot know in advance what the rates will be – even as they also do not know how much you’ll finally receive for your loan. Sure – those things might be literally true – in a way – but talking about interest rates and unpleasant details like paying the money back add time and remove fun from this quick slide into hell.
They don’t want you thinking about paying the money back or you won’t borrow it in the first place.
How High-Interest Loans Work
The way payday loans work, in general, is that you go into a heavily guarded, unpleasant place, prove that you have a job and a payday coming up. You borrow $100 and agree to pay back $120 when your check comes due two weeks later. That means you’re paying $20 in interest – 20% in two weeks. Two weeks equals 1/26 of a year, so multiplying 20% x 26 means you’re paying 520% interest on the loan per year. (For rough comparison, a home mortgage costs about 5%, and a typical credit card between 12 and 25%.) If you cannot pay in two weeks, no problem. You just borrow $120 and agree to pay back $150 two weeks later.
They Balloon Out of Control
It doesn’t seem like much at first, and while the interest rate is way too high, it isn’t much in dollars – at first. But 500% interest rates mean you’ll owe $600 at the end of one year and almost $4,000 at the end of a second year – on a $100 loan. Would you agree to pay $4,000 to borrow $100 for two years? It would cost you about $50 to borrow it using a credit card.
Why is this a “Scam?”
Notice that I do not claim the loan sharks behind this program are breaking the law, and I have not verified whether any of the statements they make are true or not. And the hard fact is that people sometimes need money badly enough to go to places like this, so what’s my beef? It’s the words “easy” and “freedom.” Borrowing a thousand dollars from loan sharks is suicidal, and the companies that encourage you to do it, minimizing the consequences and speeding you into it with as few second thoughts as possible are profoundly immoral in my view. The ticking clock with ten-minute intervals is designed to mislead a potential customer into fearing that the “approval” for the loan he or she needs will be withdrawn, and it is blatantly intended to prevent an examination of the terms and conditions of the agreements you will be entering by signing up. And the terms are so grossly unfair as to be unenforceable (most likely). But they are designed to bully and intimidate any unhappy customer, and the other marketing methods virtually assure will be many of these.