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Payday lenders are known for making fast, short-term, high-interest loans to consumers, even if those borrowers have bad credit. But the Payday lending industry has recently been making headlines as it has come under increased scrutiny from the Consumer Financial Protection Bureau. Payday lenders, particularly those that operate from online platforms, are also getting a lot of unwanted attention these days from international criminal hackers.
A Black Market Opportunity
If you use online payday loans, this is an issue you need to be aware of so that you can try to protect yourself. You may be at risk of having your personal identity or financial accounts hacked, stolen, or otherwise tampered with by criminals who specialize in digital theft and financial fraud.
According to a cyber-security expert, someone in an online forum devoted to doing black market business in stolen financial information claims to have loan data for more than 100 million payday borrowers. This claim has not been verified, but Bloomberg News did some digging and found that information listed in the criminal database matched information found on actual payday loan applications.
The Popularity and Potential Vulnerability of Payday Lenders
The payday loan industry has grown by leaps and bounds, expanding rapidly during the recent recession when credit was historically tight and millions of people were financially desperate. The popularity of payday loans has doubled within the past 10 years and payday lenders currently loan about $16 billion per year to customers.
One of the reasons that payday lenders may be more vulnerable to cyber-attacks is that unlike many major financial institutions, these smaller players may not be able to afford the sophisticated security infrastructure that major banks rely on to thwart hackers. Another weak link in the digital chain is that when borrowers are shopping around for an online payday loan, they may wind up on the website of a company that does not actually do payday lending. Instead they simply take a borrower’s financial and personal details down on a loan application, and then they forward that data along to the actual payday lenders. Along the way, of course, resourceful hackers have an opportunity to intercept that confidential data when it is not well protected.
There are also businesses that specialize in selling information about potential borrowers. Lenders with these kinds of leads may be able to market to potential consumers and convert them into actual customers. As the data about these potential customers is passed along, it may be susceptible to security weaknesses that give crooks the window of opportunity they need to steal from unsuspecting customers.
Loaning a Dollar in Order to Steal Two Dollars
In one rather dramatic case from last fall, the Federal Trade Commission uncovered a scheme where people allegedly purchased payday loan data and then used it to surreptitiously deposit money into the banks accounts of victims who did not ask for a loan or request that money.
Why, you ask, would a crook put money into your bank account? The answer is that they would then charge the people fees and interest on that money before taking it back. The FTC reported that while a total of $28 million was deposited, more than $46 million in fraudulent fees were withdrawn.
Fake Websites Posing as Payday Lenders
Also be aware that some of the online payday loan websites that position themselves as payday lenders are not actually legitimate. They are fake sites created by criminals who just set them up in order to receive loan application data that can then be stolen and sold on the black market. There are even some crooks who are willing to pay out on some loans, just to get the data that they can then illegally sell that data for a big profit.
This makes it especially tricky to guard against scams, because if you apply for a loan and receive some money it seems like you must be dealing with a legitimate lender. That may not also be the case, however, which is why experts say that it is so important to monitor your bank accounts, set up fraud alerts on your accounts, and be vigilant when doing financial transactions online.