Claudia Wilner, an attorney with the NEDAP anti-predation lending group, the Neighborhood Economic Development Advocacy Project, says it’s extremely common for her debt-distressed clients to have more than one payday loan. “Once a person gets a loan from a lender,” she says, “he is bombarded with solicitations for more.”
This binge eating is in part brought on by online lead generators scouring cyberspace for potential borrowers and, for a fee, directing them to internet lenders who make the actual loans. They have become important players in the evolving payday loan ecosystem.
Eric Barboza, a plaintiff in a lawsuit filed by the Federal Trade Commission in April, found his US Fast Cash payday loan through a television commercial for Money Mutual, a lead generator that uses Montel Williams as a pitchman. Among the sites borrowed by Robert Bradley, CCS Loan Disbursement of New Castle, Delaware and PDL Loans of Nevis, West Indies, are lead generators, although they may not have been in 2010.
“Here’s how we see it,” says a federal regulator who spoke in the background. “A lead generator shows an ad on late night television or on a website. The consumer goes to this website and gives their banking information, driver’s license and social security number. The lead generator builds a profile on this potential borrower and forwards it to lenders who are vying for this loan, as well as others with a similar profile. All of this happens in seconds. If that person is on the lead generator website, they will be directed to the lender’s website and receive an offer. After the first loan is granted, the borrower will be offered additional loans so that the lender does not have to return to the market to collect – and pay – these customers.
Some payday lenders will have a list of states where they do not provide loans. But lead generators simply send borrowers to a lender that doesn’t impose such restrictions.
According to Jean Ann Fox, director of consumer protection at the Consumer Federation of America, the use of lead generators makes it an even higher priority for payday lenders to push borrowers to take out multiple loans. “The pricing structure for marketing payday loans online makes turning around loans economically essential for lenders to make a profit,” she says. “Payday lenders pay up to $ 125 per qualified prospect, which requires multiple loan renewals just to recoup the cost of acquiring the borrower.”
As some of the larger chain stores enter internet commerce, they can also rely on lead generators. EZCorp, for example, a publicly traded company, is considering getting into what it called “the short-term online consumer loan business” and described the importance of lead generators on its record. of 2011 from the Securities and Exchange Commission. “[T]The success of our online consumer loan business will largely depend on the willingness and ability of lead providers to send leads to us at prices acceptable to us, ”the company said. “The loss or reduction of leads from lead suppliers… could reduce our potential customers and could have a material adverse effect on the success of this line of business. “
This article was published in partnership with The Investigative Fund of The Nation Institute with support from the Puffin Foundation.