Note that payday loans aren’t legal in some states, and where they are legal, some lenders are not licensed to operate. The easiest way to verify if a payday lender is licensed in your state is to check their information with your attorney general or state regulator.
Risks of Getting Payday Loans From Unlicensed Lenders
Getting a payday loan from an unlicensed lender has its attendant risks. To begin with, these lenders may have very aggressive debt collection practices and tactics compared to those licensed by relevant financial regulatory bodies. Unlicensed lenders are known to violate the Fair Debt Collection Practices Act.
They may also employ exploitative measures and underhand tactics to exploit naive and unsuspecting borrowers. For example, some payday lenders may deliberately use complex language in their loan contracts to give them room to introduce hidden fees and rollover loan terms, among others.
Unlicensed lenders also typically sell borrowers’ personal or financial information to third parties. This exposes the borrowers to a high risk of identity theft. Some even use the borrowers' personal details to open new accounts without their consent.
Remember, unlicensed lenders or lenders not licensed in your state may not have the legal right to collect or require you to pay back the payday loan as the loan may be void.