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Payday Loan Alternative Messes Up Fined $6.3 Million

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The payday loan industry has often been blamed for not looking at the best interests of their customers. Reality check – nothing could be further from the truth. There really is no alternative to these short-term loans, though in recent times, a few alternative plans have come up all over the United States. Most of them have however failed miserably. In contrast, the payday loan business remains a billion dollar industry, serving millions of customers throughout the country.

Here’s proof that there can be no alternative to payday loans

LendUp, a firm from the United States that was offering an alternative to payday lending has been slapped a fine of $6.3 billion after it was discovered that the business was violating several laws between the years 2012 and 2014. It includes a fine of $1.8 million by the CFPB or the Consumer Financial Protection Bureau as well. The California Department of Business Oversight has also imposed a fine of $100,000.

The Accusations Against LendUp and Why Payday Lenders Are Better:

  • The company inflated their interest rates and charged fees that were deemed illegal under the current laws.
  • Customers were also charged if they wanted to extend their payment period. This is never the case with payday loans. The “Extended Payment Plan” ensures you additional time without any fees. CFSA member payday loan businesses cannot force a customer to pay back in any way.
  • Further, LendUp forced an installment loan on their customers when they required a payday loan. The law says that a loan approval cannot depend on a customer purchasing another product. With payday loans on the other hand, you get the amount you ask for. Nothing is forced on you.
  • Plus, LendUp also miscalculated the interest rates and ended up charging overinflated fees. Valid and legal payday loan companies offer all information upfront to their customers.
  • The company informed customers when they take a loan from LendUp that their credit scores are going to improve, because they pass information to credit bureaus. In reality however, they rarely passed such information. The fact is that, your score can improve if you pay back a loan in time, but no business can guarantee you this, and cannot claim to be working with the credit bureaus.
  • The business was also operating in states where they were not allowed. They were allowed to do business only in California. Valid and legal payday loan companies are always committed to honor all state and federal laws. The Consumer Financial Protection Bureau monitors their member companies and ensures that all regulations are honored.

    The Promised Friendlier Terms Were Not Friendly At All.

    An online lending agency, LendUp was promising friendlier terms than the businesses that offer payday loans. But in the end, it ended up misleading their customers, forcing them, and even cheating. Payday loan businesses never do such a thing.

    Because of all the violations, LendUp will now have to issue a refund to issue a refund to a staggering 50,000 borrowers as a part of the settlement. Plus, there are other penalties as well that they will have to cough up.

    Payday Loan is the Simplest and the Easiest Form of Cash Advance

    There cannot be anything simpler or more efficient than a payday loan. Consider this:

  • You get just the amount you need. Most families can solve their day-today financial worries with a little help.
  • It is a short-term loan, so there is no long-term debt burden. No long-term debt is a sure relief for a lot of people.
  • Repayment is usually not a worry for a large majority of people as the loan amount is just a few hundred dollars.
  • The approval process is quick, which means that it is just perfect for an emergency.
  • You don’t have to stand in queue for a long time. You can apply online.
  • There is no coercing.
  • There is no collateral.
  • There is no credit check, which means that even those with a poor credit score can get the cash advance they need.
  • Your privacy is guaranteed by the lenders. Nobody needs to know that you are a little short of cash.
  • All the loan terms are clearly mentioned in the policy document. There are no hidden fees or untold policies. Simply deny the loan if something is not acceptable to you. There are no obligations.
  • You can even get an extension if you want if you are unable to repay the loan amount for some reason, and that too without any fees.

    Payday Loan Alternatives

    The reality is that, there is almost no practical alternative to a payday loan.

    Loans from banks and conventional agencies don’t work out because the application and lending process it too long. It can sometimes take weeks, which many cannot afford. You will also have to put up collateral, which many people are not able to. They will also carry out a credit check. Your application can, and probably will be rejected, if you have poor or even an average credit score.

    The other alternatives to generate extra cash include borrowing from retirement funds (which many people don’t have anyway), loaning from credit cards (extremely costly), a personal loan (again very costly), renting out a room (not possible if you are living in a small home), moonlighting (impractical for a lot of people), cutting the insurance premium (very risky and not advisable), borrowing from life insurance (you will receive less on maturity and the impact is long-term), and selling your personal assets (very demoralizing).

    A few financial plans have also been launched as an alternative to payday loans in the belief that we ought to do away with these short-term cash advance plans. In recent times, a lot of regulations have also been passed against these loans, and restrictions have also been imposed. But what has been the result of all this?

    The banks and other conventional lending agencies haven’t been come out with an alternative that works. See how the LendUp initiative failed. In fact, there is not a single plan that has managed to become as popular as payday loans. Why? That is because customers don’t find them practical or useful. They cannot match the advantages that payday loan companies offer. Let customers have the last word in this. Let the market decide what it wants. Isn’t that what capitalism is all about?

    Indeed, there are plenty of good reasons why payday loans have become so popular and have served millions of people in the United States.


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