North Carolina Department of Justice

North Carolina Department of Justice

North Carolina Department of Justice
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Fast cash loans cost more than you bargain for


By Attorney General Roy Cooper

Families strapped for cash may find payday loans and other quick cash loans tempting. But consumers who take out these high-interest, short-term loans often find themselves borrowing one loan after another simply to make the payments, trapping them in a long-term cycle of debt. According to a recent study from the Consumer Financial Protection Bureau, almost 70 percent of payday loan borrowers take out an additional loan within a month.

I’ve fought for years to keep unfair loans out of North Carolina, chasing the last payday lenders out of our state a decade ago.  But some lenders continue to skirt the law by targeting desperate borrowers online. My office and the North Carolina Banking Commission recently won $9 million in refunds for consumers from online fast cash lenders CashCall and Western Sky. The settlement also requires these companies to stop collecting on loans in North Carolina, cancel all loans owed by North Carolinians, and stop lending in the state.

The settlement marks North Carolina’s first successful effort to ban an online payday-type lender that tried to evade the law by claiming affiliation with an Indian tribe, and it’s expected to help us enforce North Carolina’s strong laws against other illegal online lenders.

If you find yourself in a bind and are considering turning to an online loan for quick cash, make sure you know the risks:

  • The debt trap. Many payday loans are due in full on your next payday, typically in two weeks. If you’re unable to repay the loan by then, you could get stuck taking out new loans or rolling over the old one, forcing you to pay more interest and fees on the same debt over and over again. Other online loans are longer term, but because of their high interest rate, almost all initial payments go to interest rather than helping you pay down the principal balance.
  • Fake debt collectors. Consumers who apply for online loans are frequently targeted by scammers who try to collect on loans that weren't even made. These criminals are known to be relentless, often claiming to be law enforcement officers, attorneys or government officials in order to threaten lawsuits, arrest, and visits to your home and workplace unless you pay.
  • Harassing you for payment. Online payday loan debt collectors can be more difficult to deal with because they may be unlicensed or based in foreign countries. Once a payday lender has your personal and financial information, you may find that the only way to keep them from taking your money is to close your account.
  • Unauthorized withdrawals. When an online payday loan is active, the lender immediately deducts a loan payment from the borrower’s bank account after the borrower gets their paycheck. That should stop when the loan is paid off, but borrowers sometimes find that deductions continue even after their loans are fully repaid.
Before taking out an online payday or short-term loan, explore all your options, including:
  • Savings accounts or rainy day funds
  • Working with your creditor directly to work out an extended payment plan
  • Loans from friends, relatives, your church, or social service agencies
  • Salary advances from your employer
  • Small, low interest, short-term loans from a credit union
  • A credit card advance or a loan from a local consumer finance company

If you do take out a loan as a last resort, make sure you understand the loan terms and conditions. If the annual percentage rate of interest (APR) is more than 36%, then the loan is high cost and will be very expensive and difficult to pay off.

If you’re experiencing problems with a payday or short-term lender, remember that our office is here to help. Contact our Consumer Protection Division by phone toll-free within North Carolina at 1-877-5-NO-SCAM or file a complaint online at