Barbara Shelly

Down the rabbit hole of online payday lending

More evidence that Congress and federal regulators should curb the runaway online payday lending industry comes from an amazing NPR report today by reporter Pam Fessler.

While researching the industry, Fessler logged on to one of the many Internet sites offering quick cash online. She gave a fake name and an obviously fake Social Security number — all the same digit. When asked for a bank account number and routing number, “I made that up too,” Fessler said.

In less than a minute, she had been pre-approved for a loan of up to $750. The catch: an interest rate of $225 for a week’s loan. That would be an annual percentage rate of more than 1,300 percent.

Fessler terminated the interaction, but that was hardly the end of it all. As she reported:

“Within minutes, my phone rang (I had entered my real phone number). It was a guy from Tremont Lending, in South Dakota. I told him I was a reporter, that I didn't really want a loan, and I figured that would be the end of it. But then, I started to get more calls.”

The calls went on for months. Fessler’s information, phony though it was, had been picked up by a service called a “lead generator” and was being bartered around the shady universe of online payday lending.

You can listen to the report


. It is both entertaining and scary.

Fessler is a reporter taking a skeptical view of online short-term lending. She’s not a likely candidate to get snookered into one of these loans. But what about all the other people who open up one of these websites and enter their authentic personal information, because they’ve been out of a job for awhile or they’re chronically short on cash or for any number of reasons? With the relentless, ongoing pressure that Fessler describes, how long before vulnerable customers get sucked into loans with ridiculously high interest rates?

And it’s almost never just one loan. The payday loan industry, both online and storefront, relies on repeat customers. Take out a loan once and they never let up.

As The Star


a couple of months ago, the Kansas City area is a hub for online payday lenders. Johnson County, especially, is dotted with the estates of people who have made millions of dollars while draining the bank accounts of desperate people. The region’s connection to the seedy on-line lending industry is a poorly kept secret among bankers and within polite society.

Fessler’s report reveals how difficult it will be to crack down on Internet lenders. They operate with front companies, phone numbers that no one answers and addresses that don’t exist. It’s very hard to get to them. But rest assured, consumers, they will get to you if you crack open a door.

A $750 loan with a $250 interest rate isn’t the answer to anyone’s problems. Aggressive federal action is needed, and the sooner the better. In the meantime, these places are best avoided.