For so many San Francisco Bay Area families, making ends meet is more challenging than ever. The bills are piling up, with little or no money coming in.
A short-term loan might seem like a solution, but consumer advocates have a word of caution about "quick cash" offerings.
The Consumer Financial Protection Bureau has logged more than 31,000 complaints about consumer loans since 2011. Many of those complaints involve "payday loans," which are easier than ever to get online.
Claudia Deeg, a consumer advocate with the California Public Interest Research Group, says short-term payday loans can have long-term consequences.
"These loans have sky-high interest rates, often 400 percent or more," Deeg said. "That adds up really quickly, and can force borrowers to take out new loans again and again, trapping you in a cycle of debt."
Some lenders entice borrowers with the promise of quick cash. The U.S. Federal Trade Commission recently accused 11 "payday loan" websites of misleading customers and pulling money out of their bank accounts without permission.
One of the lenders "bled consumers dry, by promising a single payment payday loan, but then automatically debiting consumers’ bank accounts for finance charges every two weeks, in perpetuity,” the agency said in a news release.
The California Financial Service Providers Association (CFSP), a trade group for short-term lenders, told NBC Bay Area it supports the FTC's action, but that regulators need to do better.
"CFSP members are heavily regulated at the federal and state level and are providing responsible services, especially during this pandemic," CFSP said via a spokesperson. "These scofflaws are not us. Federal and state regulators have done a poor job cracking down on illegal operators like this. Their inaction puts hard working Californians at risk, especially at times like this, and is unacceptable."
Before you dig deeper into debt with a loan, first try to work out payment plans with everyone you owe: your landlord or mortgage holder; your bank; credit card companies; and utility providers. Also, consider credit counseling, or consult a bankruptcy attorney. Many will look at your finances for free.
If you do ultimately take out a short-term loan, read the contract carefully. Don't sign unless you understand how much you'll pay in interest and fees. Also, ask about penalties if you miss a payment.