Payday loan providers are known predators. The loans are generally easy to borrow, but difficult to repay. They’re attractive to many because no credit check is required. However, cash flow problems lead to some borrowers keeping the loans for several months and paying hundreds of dollars in interest. Despite warnings from government agencies and consumer groups, payday loan businesses are growing, even online.

Online payday loans may attract borrowers who’ve maxed out the number of outstanding payday loans they can have in their state. Or, people may like the convenience or anonymity of using an online payday loan site. However, these sites may be even riskier than borrowing from a brick-and-mortar payday loan store.

Regular payday loan stores are required to abide by state laws. That means only allowing you to borrow a certain amount of money, charging a certain amount of interest, and only debiting your account for the correct amount of money. Online payday loan sites could be operated from states or countries that don’t have to follow these laws and can’t be punished if they break the law. You have even less protection against online payday loan providers.

When you sign up for online payday loans, some unscrupulous companies use your debit or checking account information to enroll you in subscription services against your knowledge. Unfortunately, these subscriptions can be hard to cancel and may even cause overdraft charges.

In another scam, consumers complain that they are pursued for nonexistent debts after applying for online payday loans. For example, the FTC has recently settled charges with a California man who used fake debt collectors to get money from consumers who’d applied for payday loans. The fake collectors operated out of India and thus may not have been subject to the U.S. law for debt collectors. The collectors often imitated law enforcement or government agencies to pressure consumers into paying these debts.

Giving out your personal information over the internet is risky. It’s extremely easy for companies to create legitimate-looking websites that are only a front for a bigger scheme. Check out the company’s Better Business Bureau rating to help figure out if it’s a company worth doing business with. Avoid companies that have poor ratings with the BBB.

If a company says you owe them money, do your own research before paying, no matter how severe the threats may sound or how much of your personal information the company has. Get as much information about the alleged debt as you can – the name, address, and phone number of the company, when you borrowed the money, how much they say you owe – and use the internet to look up the company. Known scams are often posted on the internet, so a little due diligence can save you hundreds of dollars.

Keep a record of any loans you borrow, especially the name of the company and the date you borrowed the money. Also, keep record of your payment so you can reference that information if there’s ever a question about whether you paid.

Emergencies happen, so it’s better to prepare for them by building an emergency fund. Put $25 to $50 in a savings account each month and you can have a $150 to $300 saved up in just six months. Saving money may not be fun, but neither is dealing with a payday loan scam. Precautions now can save you a lot of headache later.

Source CBSNews.com