Payday loan ads are all over social media - Here's how they're skirting the rules
It has been a tough few years for many Americans. Unfortunately, trying to stretch every dollar to buy the necessities has become the norm. Some might look into a second or third job to pay the bills.
This is precisely the type of person that payday loans are targeting. Promising quick cash without telling the whole story of the loan costs, these advertisements have been popping up on social media platforms like TikTok.
Read on to find out how these companies skirt the rules and why taking a payday loan is bad.
Here’s the backstory
All social media platforms have advertising, as it’s a primary way to bring in a profit. But some sites aren’t as strict about ad content as others. For example, TikTok claims to have a policy against “exaggerated performance or promise.”
Yet, there are plenty of payday loan posts that target vulnerable users. According to Media Matters for America, three companies consistently violate TikTok’s advertising policies by promoting payday loans.
By promising instant money, the posts from Earnin, Brigit and Albert target those who need cash in a hurry with wording such as “living from paycheck to paycheck” or being always “broke.” It is unclear how the advertising is allowed to be on the platform.
But Earnin is no stranger to controversy. The company settled a $12.5 million lawsuit over deceitful lending practices three years ago. Brigit and Albert are also not registered with the Better Business Bureau (BBB), as some users claimed there were unexpected fees or missing deposits.
What you can do about it
It might seem like a lucrative opportunity to quickly get some cash in your wallet, but there will always be a catch. The interest rate will be exorbitantly high, and they don’t call it that often. Some advertising will use words such as “fee” or “tip” without mentioning the interest rate.
According to the Consumer Financial Protection Bureau, a two-week payday loan with a $15 fee to borrow $100 gives you an annual percentage rate of 400%. That’s far higher than the typical 30% of a high-interest credit card.
Why you should reconsider using buy now, pay later loans
If you have an ongoing subscription service, the easiest way to pay is to set up an autopay plan. If you’re worried about late fees and interest, autopay is one way to avoid those penalties.
While you may be tempted to spread autopayment plans around, some recurring charges are better off being paid as you go. For example, an annual fee may cost less per month than a monthly charge, but it could hit you hard when that annual payment comes due. Tap or click here for five bills you should never put on autopay.