There are numerous lenders online, but many of them are engaged in predatory lending practices. However, these practices are illegal. There are several reasons for this:
1. The Effects Of Anonymity:
Online lenders rarely have face to face interaction with borrowers. This makes them less inhibited with regard to predatory lending practices, and it makes it easier for them to lie to potential borrowers. It also can make them less likely to be investigated. Some predatory lenders even take measures to hide their physical location, such as concealing their IP addresses.
2. Predatory Lenders Hide In Plain Sight:
The number of predatory lenders on the internet makes it easier for them to avoid investigation. It simply is difficult for law enforcement to be able to go after all of them. This is particularly true with regard to predatory lenders who operate on the margins of illegality. There is debate as to at what point lending practices become illegal.
3. Online Reviews Aren’t Always What They Seem To Be:
Predatory lenders are known to post fake positive reviews. These fake reviews can appear in a variety of places, such as the lender’s website or even well known review websites. Most review websites do not control who is able to post reviews. Fake reviews written by predatory lenders can often appear quite believable. Negative reviews can sometimes be suppressed by the fake reviews.
4. Online Lenders Have Access To A Vulnerable Demographic:
Many people who lack knowledge about what to look for in a loan search for loans online. This uniformed demographic of people tends to be quite vulnerable to falling for predatory lending practices. Many individuals looking for loans online are also quite desperate for money, and they may be easily tricked by predatory lenders’ online ads. Furthermore, some predatory lenders may trick borrowers of car title loans to sign on to contracts for adjustable rate loans.
5. Predatory Lenders May Not Always Be Able To Verify That The Information Provided By Borrowers Is Accurate:
In order for a legitimate lender to allow someone to borrow money, they have to know that the borrower is providing accurate information. This isn’t always possible online, and predatory lenders know this. Therefore, it is possible that predatory lenders to get away with allowing people to borrow money when they aren’t able to pay it back. This often results in the lenders taking an item that was used as collateral, such as an individual’s car or even their home.
6. There Is Little Oversight With Online Advertising:
When predatory lenders advertise their businesses on the internet, it’s possible for them to entice clients in ways that offline lenders wouldn’t be able to get away with. Online advertising companies often don’t carefully screen the ads that their clients are running. There simply is such a large volume of ads being run through many online advertising agencies that it’s impossible for them to individually screen the ads, and there is often little to no face to face contact with the clients. The lack of face to face contact makes it even more difficult to screen clients.
Furthermore, online advertising can reach a large number of people. This is true even if the ads use highly deceptive tactics. Online banner ads can be distributed to thousands of people with almost no oversight. Furthermore, the ads can be targeted to vulnerable people. The nature of online ads that appear on one’s screen can have to do with the terms that one searches for.
7. Online Loans Are Popular:
There are many common circumstances that cause people to borrow money online. Some examples of common scenarios that motivate people to look for online loans include:
– Purchasing a house
– Purchasing a vehicle
– Inability to cover routine expenses
– Medical bills