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Tuesday, May 15, 2012

Equifax says pay day lenders not reporting correctly

According to Julian Knight at The Independent, Equifax issued an alert recently indicating that some pay day lenders are failing to report all of their lending transactions.  This causes the credit histories provided by Equifax about consumers who utilize pay day lenders to be incomplete.  As a result, when a potential creditor accesses such a consumer's credit report, the creditor will be unaware of the pay day loans and the subsequent payment history of the consumer on those loans.

Pay day lenders are short term lenders that lend short term with huge interest rates.  Interest rates on the short term loans can be as much as 4,000 percent (yes, you read that right).  The loans are so short term that the interest on them seems small, even though its actual yearly percentage is huge.  The pay day loan industry is accused of targeting the poor and the young and forcing them into a debt ridden lifestyle.

Pay day lenders should report their account histories correctly, thereby rewarding those that pay timely with good reporting that could improve the consumer's credit score and hopefully allow him or her to escape the pay day loan trap.  Unfortunately, pay day lenders do not have much incentive to do this, since it could conceivably cost them future business.

My advice - avoid pay day loans like the plague.

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