Payday loan companies, located in stores and on the web, are bringing in loads of loan applicants who fill out personal information on their loan applications. These potential customers are looking for quick cash to help them out of a financially stressful bind and do not necessarily read the fine print on the application. If you see, most often in small type, the words "not a lender" then the business you are dealing with is not the company who will be lending you money. This business will take your information and sell it off to a lending company as a profitable "lead".
These leads get sold off in auction type sales to companies who do the money lending. This business is growing rapidly and regulators are getting a continuously growing number of complaints. It seems that there are some scam companies who are purchasing the "lead" data, but are using the information fraudulently.
In auctions style bidding, the sale goes to the highest bidder. The bidder may be a legitimate lender or a scam company who now has enough information which is financially sensitive to start making unauthorized withdrawals from bank accounts. The Consumer Financial Protection Bureau director, Richard Cordray, spoke of his concern at a hearing in Birmingham, Alabama.
As complaints continue to rise in number, so do the profits of lead generating businesses. The business practices of lead generators usually hold their operation details behind closed doors, but there have been a few who have spoken briefly about the practices. Once "lead" data has been collected the information gets sold to the highest bidder. A lending company might put a $100 bid to have the "first look" at an applicant as a potential client, while another company might bid $80 for the "second look". The "lead" information eventually gets sold to a lender who will make efforts to close the loan deal.
A borrower fills out an application and the information gets tested for authenticity against stored databases of home and email addresses. Once it passes the filter, it gets sent into an electronic auction and lenders will have seconds to make a decision as to whether or not to purchase the lead.
Two of the complaints being made:
1. Foreign companies purchasing the information and calling the numbers putting pressure on person to make payments on debt which they never made.
2. Some lenders are acquiring the leads and lending to clients misrepresenting their loan fees and at times wrongfully debiting bank accounts.
Some lenders are also lead generators. There will be a disclosure sentence informing the applicant that the business loans and finds lenders. If the company you apply with will not fund your loan for whatever reason, your information will be sold to another lender. Counterfeit companies will take the information without even completing the form, where legitimate companies will only sell information if the application was fully completed and sent in. Eleven states make it mandatory for companies who are payday loan lenders to have licenses; a bill to make lead sellers obtain licenses as well did not make it through the Senate.
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