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Within the past decade, we’ve started to see a shift from traditional lending companies, towards a more digital platform.

Taking the business online has many immediate benefits. Most of this favour the lending companies themselves, such as the streamlining of the work, as well as the overall ease of using digital tools versus analogue ones. A website is much more accessible to the people, and much easier to market when compared to a storefront or office that people have to find. Digital records are easier to manage than paper bookkeeping. And the ability to transact with customers almost immediately from a website stands as the most attractive advantage for everyone involved.

On the client’s end, going digital means all the hassles are removed. Taking out a loan has become as simple as contacting the lending company through their website or email, and supplying a minimal amount of documents. After a day or two, when your loan has been approved, you get the money straight into your bank account. There is, however, a tradeoff that comes with all these benefits.

As these newer technologies are implemented over the existing ones: the ease of operating a website, and offering loans behind it, mean that the illegitimate practices become much easier as well.

The problem for everyone is that the foul players in this field don’t have to be genuine; they simply have to look the part. As a result,  people mistakenly put their trust in them and find out the hard way that their shady practices do not hold up. Eventually, various scams or even harm befall these unsuspecting patrons. These include, but are unfortunately not limited to overpayment, identity theft, extortion, and abuse. And all of these come with the risk of being implicated in their illegal activities.

Once the damage is done, these illegal lenders become difficult to confront, as they can simply disappear behind their websites, take it down, and start another under a new name. The process is then repeated with no regard for the harm they cause, and as a direct consequence, suspicion grows as people lose trust within the trade, ultimately creating a toxic environment for customers, and authentic lenders alike.

So what’s the solution to having these offenders in the business?

How can clients avoid falling into the trap of dealing with illegitimate lenders?

On one hand, it is the responsibility of every lending company, online or otherwise, to prove without a doubt that they are indeed an authentic business registered with the local/national government and that they are accountable for their transactions. For potential clients, the responsibility lies in being able to identify the traits that make a lending company legitimate. Informed customers become difficult to cheat.

The most important thing to look for when verifying a lending company is whether or not they are authorized to operate by the Securities and Exchange Commission(SEC). Anyone looking to borrow money from these companies should make sure that they provide receipts or invoices for any and all transactions they make. These are the proofs that show the company is properly tax mapped, monitored, and more importantly, sanctioned by the government. Any lending company that fails to prove these, should be reported immediately. You can always confirm this with SEC if you are having suspicions you are not sure of..

Another thing to look for is that they are properly traceable. They must have a company email address, as well as landline numbers to contact (Gmail accounts and mobile numbers simply will not suffice). Regardless of fact that they are an online lending company, they must also have a physical office that can be visited as easily as their website. Look for the use of secure connections and how they keep the information of their clients safe. Just because they’ve become an easy alternative to banks or credit companies, doesn’t mean they should take sensitive data any less seriously.

These days…

Multiple verification sources such as social media can boost public confidence for a company. People trust what they can see in the open. At the same time, social media can act as a signpost for people to voice out their opinions and experiences about certain online lenders. Naturally, more people will trust those with positive reactions, while those with negative reactions are called out for them. People take notice of these things, as well as how the companies react to these reviews. Even a good lender can get into a bad spot. What matters is their transparency and professionalism in fixing the issues they are called out for.

Take note of how they consult you as their clients, especially if you are made to feel uncomfortable, or rushed into making the deal. Professionalism can be faked, but it is still something to look for in the business. Most importantly, an authentic lending company will value their clients own authenticity as much as their own. Make sure that they put in the proper effort and interest in verifying you. A thorough and consistent check for documents and validity is what you want to see from responsible lending companies.

There will always be people out there who will try to take advantage of others or the system. But that doesn’t mean you have to be a victim. Staying informed is the best way to keep financial services secure. If we know what to look for, we can support the honest practitioners of the trade. So, we can call out the unscrupulous ones for their offences. In order to assure all business conducted is legal, there is a mutual responsibility between companies and clients to validate themselves and each other.

What about the illegitimate lenders?

The right thing is always to inform the authorities. However, simply avoiding them, and letting others know is often the most effective measure. No matter how tempting their offers are, it will never be worth the damage they cause. Stick to the good guys. They’re in this business to be in a long and healthy business relationship with you, not just a quick scam.

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