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The past few years have been difficult for many Americans. Unfortunately, trying to stretch every dollar to buy basic necessities has become the norm. Some might consider a second or third job to pay the bills.
This is precisely the type of person that payday loans target. Promising quick cash without telling the full story of loan costs, these ads have been popping up on social media platforms like TikTok.
Read on to find out how these companies are bending the rules and why taking a payday loan is bad.
All social media platforms have advertising as it is the main way to generate profit. But some sites are not as strict about ad content as others. For example, TikTok claims to have a policy against “exaggerated performance or promises”.
Yet, there are many payday loan messages that target vulnerable users. According to Media Matters for Americathree companies systematically violate TikTok’s advertising policies by promoting payday loans.
Promising instant cash, posts by Earnin, Brigit and Albert target those in need of quick cash with phrasing such as “living paycheck to paycheck” or always being “broke”. It is unclear how advertising is allowed to be on the platform.
But Earnin is no stranger to controversy. The company settled a $12.5 million lawsuit three years ago for deceptive lending practices. Brigit and Albert are also not registered with the Better Business Bureau (BBB), as some users claimed there were unexpected charges or missing deposits.
It may seem like a lucrative opportunity to get some cash in your wallet fast, but there will always be a catch. The interest rate will be exorbitant, and they don’t call it often. Some advertisements will use words such as “fee” or “tip” without mentioning the interest rate.
According to the Consumer Financial Protection Bureau, a two-week payday loan with a $15 fee to borrow $100 gives you an annual percentage rate of 400%. That’s way more than the typical 30% for a high-interest credit card.
It may leave you in a cycle of debt, but according to the BBBthere are safer alternatives to payday loans:
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