The electronic age has arrived. Many consumers, investors, and entrepreneurs transact their business over the internet. An ordinary depositor can go online and open a webpage that contains information about his checking account. From this webpage, the depositor can make fund transfers, pay bills, and do a host of other financial transactions. The internet is a great tool for people who wanted to save time from waiting in line inside the bank premises. But the internet does not have the reputation of being the safest place. There are many fraudulent activities conducted over the internet. The internet can be a medium for criminal activities.

With this nature of the internet, a potential borrower may want to reconsider an application for a payday loan. He may want to hit the escape button or click “cancel” instead of choosing “ok” or “send application.” This is because there are many risks in obtaining payday loans from internet lenders. The two most documented consequences of acquiring a payday loan online are identity theft and loss of bank security.

Identity theft is a potential threat when obtaining payday loans using the internet. With online payday lenders, the borrower must fill out an online application form that demands personal information such as the social security number. This social security number should be given only to trusted institutions and not to anyone. A stranger can access much information about a person by simply using the social security number.

This means that the online payday lender may not be a real lender but a phishing site. Phishing is obtaining personal financial information by asking the internet surfer to fill out and then send forms. The real banks and credit unions have placed safety measures against phishing. Their web addresses contain the “https” in which the added letter “s” means a secure site. For many internet payday lenders, there are no measures taken to secure their site from hackers.

The loss of bank security is a grave consequence of using online payday loans. These internet payday lenders will always ask for the borrower’s account number and routing number. Their reason sounded legitimate. The account number and routing number will allow the internet payday lenders to deposit the amount being loaned from them into the borrower’s account. But, the disclosure of account numbers will also allow the lenders to withdraw from the borrower’s account. Thus, it is a possibility to end up with zero balance instead of obtaining the loaned amount.

The security measures placed by banks and credit unions become powerless when the borrowers give their consent to payday lenders to automatically renew the terms of the payday loan. This automatic renewal means that the lender can keep withdrawing the finance charge from the borrower’s checking account every payday. Unless the borrower contacts the lender and makes specific arrangements to pay the loaned amount in full, this withdrawal will continue and the debt is never paid. The automatic renewal implies that the borrower will need to take another route of action to pay off the debt.

Of course, the borrower can file a complaint against the payday lenders. But such complaints can be quite difficult for internet payday lenders because they rarely reveal their actual location. Some internet payday lenders even claim that their office is outside the country. Nevertheless, the Federal Trade Commission assures that any complaint filed against lenders must be filed in the state where the borrower lives. The payday loan is also subject to the laws of the borrower’s state.