The envelope looked official enough. "Confidential materials enclosed," it said on the outside. "Unauthorized use strictly prohibited."
Evelyn Potter, 81, could feel something the size of a credit card within. Opening the envelope, she found a plastic card with her name and a "reservation number" printed on it. The card invited her to "get up to $500 in your checking account by tomorrow."
For The Record
Los Angeles Times Thursday, November 22, 2012 Home Edition Main News Part A Page 4 News Desk 1 inches; 42 words Type of Material: Correction
Payday loans: A column in the Oct. 30 Business section about payday lending cited a press release for NeedRapidCash.com that was posted on PR Web. The press release was posted by UrgentCashNow.com, not NeedRapidCash.com parent company Selling Source, as the column indicated.
Unsure what to make of the offer, the Valley Village resident handed an accompanying letter to her husband, Brent, who'd been a banker for about 30 years.
"Did you know you can use this cash any way you like?" the letter said. "You can. It's your money."
What we're actually talking about is a sneaky way of pitching payday loans that can come with annual percentage rates as high as 700%. We're also talking about a cunning ploy to get people to disclose sensitive information that can end up in the hands of marketers.
"I've never seen anything like this before," Brent Potter told me. "They're not even disclosing an interest rate. Someone who needed money could very easily get into a terrible situation."
In the Potters' case, the pitch was from a website called NeedRapidCash.com, which makes clear in its fine print that it doesn't actually give loans. What it does is "submit the information you provide to a lender."
Or to whomever is willing to pony up the most money for your Social Security number, bank account number and other personal info.
"They're auctioning off completed loan applications to the highest bidder," said Jean Ann Fox, director of financial services for the Consumer Federation of America. "Some might be real lenders, some might not. It's very dangerous."
NeedRapidCash.com and similar sites serve as so-called lead generators for payday lenders, which pay about $100 for people's loan applications, regardless of whether they end up making the loan.
Fox said online payday lenders are proliferating as their storefront counterparts shrink in number amid more aggressive regulation by state and federal regulators.
Frequently, it's unclear what state online payday lenders are operating in -- or even whether they're in the country.
The site's Internet Protocol address, which marks its real estate in cyberspace, leads to a data center in Las Vegas, where employees told me they'd never heard of NeedRapidCash.com. They figured the site must be based on one of the various Internet services using the data center's equipment.
A phone number connected to the site's IP address rings the Las Vegas office of a company called the Selling Source, which bills itself as a digital marketing company and operates other lead-generation sites for payday loans.
Charles Goodyear, a spokesman for the Selling Source, acknowledged that NeedRapidCash.com "is part of the network." He declined to answer other questions, including why NeedRapidCash.com makes it so hard to contact anyone working for the site.
It's not like they're trying to keep a low profile. In August, a poorly worded press release was posted on PR Web touting NeedRapidCash.com as a "simple but effective customer-friendly system" to help people receive "instant cash advances."
It quoted an unnamed spokesperson for the company as saying that "many of our lenders" do not perform credit checks and that consumers with bad credit still can get a loan.
As with all payday loans, however, this can lead to a bottomless pit of debt. The problem is that you're borrowing against a future paycheck. When that check comes in, you may not have enough to pay off the loan or to cover new expenses.
And so you take out another loan. Before you know it, you're trapped in a perpetual cycle of high-interest payments.
The policy makes clear that in filling out a loan application, you'll be submitting your name, address, email address, assorted telephone numbers, birth date, Social Security number, financial account information, income infor- mation and employment information.
Even though Need- RapidCash.com says that "your privacy is important to us," it proceeds to spell out that your information can be sold to others, including direct-mail marketers, email marketers (read: spammers) and telemarketers.
Complaints about payday lenders and lead generators can be filed with the Consumer Financial Protection Bureau and the Federal Trade Commission.
Meanwhile, pending legislation in the U.S. Senate would ban lead generation for online payday loans. The Stopping Abuse and Fraud in Electronic Lending Act, called the SAFE Lending Act, also would require online lenders to abide by the laws of the state where their customer resides.
This is an important bill and would provide helpful consumer safeguards. While it makes its way through Congress, though, the smartest thing you can do is walk away from any pitch that tries to sucker you into applying for an online payday loan.
These are eel-infested waters, and you don't want to swim there.
David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send tips or feedback to firstname.lastname@example.org.