If you spent too much money during the holidays, as many people did, you may be in a frenzy about how to pay your bills this month and next.
As you're shopping around for options, be very careful.
A new, odious scam has popped up for some people who have applied for loans on the Internet, including service members.
Victims report receiving phone calls from people claiming they had committed an "illegal act" by applying for a payday loan online, and demanding a payment to avoid arrest or a lawsuit.
Many of these "fast cash" Internet lenders are not lenders but simply take personal information from applicants and send it to unnamed agencies, which may or may not provide loans.
It happened to medically retired Army Staff Sgt. Gerald Purkey, whose wife is stationed at Joint Base Lewis-McChord, Wash.
The Purkeys had applied online for a $700 loan but decided they wouldn't accept the terms, which would have required paying an extra $643 in interest and fees at a rate of $170 each payday.
Just one day after he read an article in Air Force Times about the scams involving threatening phone calls people received after applying for online loans, Purkey's wife got a phone call from someone claiming to be from the "Philadelphia Enforcement Agency."
The caller had her Social Security number, address and cell phone number, which she had provided on the loan application on a secure website. She was told she had committed illegal activity by applying for the loan — and if she didn't pay a fine of $520, charges would be filed.
She called her husband, "really upset," Purkey said. But he assured her it was a scam.
At press time, the Purkeys were in the process of notifying the three national credit reporting agencies to put fraud alerts on their accounts. Meanwhile, they're being inundated by calls from other "lenders" who had gotten their information.
At least two others in the military community have been hit with the same scam. Defense Department officials issued details about the scams to military installations, said Pentagon spokeswoman Air Force Maj. Monica Bland.
Defense officials also are following up to "determine whether action through regulators or attorneys general is warranted as a violation of either the DoD regulation or state laws on deceptive practices," she said.
The Military Lending Act prohibits lenders from giving military personnel loans with an annual percentage rate higher than 36 percent. Payday lenders typically charge interest equivalent to 400 percent APR.
The Pentagon's regulation interpreting the law limits the interest-rate cap to payday loans, refund-anticipation loans and vehicle title loans.
Defense officials advise service members to stay away from Internet lending sites unless they have a previous relationship with the institution represented by the website — such as an installation-based military bank or credit union.
"Service members need to read the ‘about us' Web pages on these sites and the disclosures and legal disclaimers that are usually in small print at the bottom of the Web pages on these sites," Bland said.
Several sites have disclosures similar to this one:
"The operator of this website is not a lender, does not broker loans to lenders and does not make short-term cash loans or credit decisions. This website does not constitute an offer or solicitation to lend. This site will submit the information you provide to a lender. Providing your information on this website does not guarantee that you will be approved for a short-term cash loan."
If you see verbiage like that, the best thing you can do is leave the site immediately. Don't provide any personal information; you have no way of knowing where it will end up.
If you need a loan, go to your installation bank or credit union, or other trusted lending institution, first. If you have a financial emergency, visit the local office of the Navy-Marine Corps Relief Society (www.nmcrs.org); Army Emergency Relief (www.aerhq.org); Air Force Aid Society (www.afas.org); or Coast Guard Mutual Assistance (www.cgmahq.org).