How to Perform a Background Check on a Loan Company
The role played by loan companies is a controversial one in the financial industry. Short-term loan companies, often called payday lenders, are viewed by some as pariahs and by others as providers of a needed resource. Before you become involved in seeking a loan from one of these services, it would be wise to preform a background check on the lender.
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Instructions
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Perform a review of the lender's activity by visiting the local district court clerk's office. Through this office, you should be able to ascertain whether the company has a history of involvement in litigation. Pay special attention to cases in which the loan company is listed as a defendant. Keep an open mind about the circumstances of each case. However, if there is lengthy history of legal activity against the lender, it may be a good decision to conduct business with another provider.
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Check with the officers of the state agency that has regulatory powers over the loan industry. This state agency must allow you to access agency records pertaining to the lender in question provided that the records are subject to state or federal sunshine laws. Items to search for include past disciplinary actions, complaints and dispositions of complaints against the lender that have been registered with the agency, and confirmation that the lender has maintained appropriate amounts of reserve funds.
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Research the history of the lender with consumer protection groups such as the Better Business Bureau. Keep in mind that lenders will come under heavy criticism for attempting to collect loans that are legally due to them. Ensure that you maintain an open mind when reading complaints from other consumers.
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Tips & Warnings
It is important to note, depending on your state, that short-term loan companies may have a difficult time operating by law. For instance, it is a felony offense for payday lenders to participate in their traditional business model in Georgia.
Payday lenders are likely constrained by law in how much interest they can charge. Do not hesitate to check with the state regulatory agency in order to ascertain whether your lender is charging too much interest. Keep in mind that lenders have historically attempted to find loopholes in the law in order to charge higher-than-allowed interest rates. So always operate by the philosophy of "Buyer Beware!"
