Payday lenders made about $49 billion in high-interest loans last year. More than a third of those loans were made online. I wondered what happens when you apply for such a loan, so I decided to find out.
In the course of reporting a story earlier this year, I logged on to a site called eTaxLoan.com and filled out an application.
I asked for $500 and, to be safe, I made up an address, a name (Mary) and a Social Security number. The site asked for more sensitive stuff — a bank account number and a routing number — and I made that up, too.
In spite of the made-up information, in less than a minute, I got a response.
"Congratulations. Tremont Lending has been selected as your lender and you have been pre-approved for a loan up to $750."
If I wanted to borrow $750 for a week, I would have had to pay $225 in interest. The site said that was an annual percentage rate of more than 1,300 percent.
I did not agree to take the loan.
But within minutes, my phone rang (I had entered my real phone number). It was a guy from Tremont Lending, in South Dakota. I told him I was a reporter, that I didn't really want a loan, and I figured that would be the end of it. But then, I started to get more calls.
"Hi, Mary. My name is Ethan, Ethan Foster, and I'm calling from InstaLoan. And this call is regarding the loan application which you put online. It has been successfully approved by our company as a personal loan."
"This message is intended for Mary Kettler. Mary, the very second you receive this message, I need your urgent attention to return the call. My name is Tom Watson."
For months, I got dozens of calls. Many of the callers had strong foreign accents. One caller, who said his name was Kevin, told me that Mary had been approved for a loan of up to $5,000 — 10 times what I initially asked for.
Kevin said he was from a company called Cash 4 You, which was unconnected to eTaxLoan.com. By this point, I was wholly confused. ETaxLoan had said it was a secure site, but now, many different companies had my application — and, presumably, my personal information.
It turns out there's a huge online bidding process for such loans. ETaxLoan isn't a lender at all, but something called a lead generator. It finds potential customers, then passes them on.
When I tried to contact eTaxLoan to learn more, I might as well have been looking for the holy grail. The company's customer service line connected to a recording that said "due to an overwhelming response to great loans," it could not take calls. The site lists an address in Delaware — but the company isn't at that address. I spent days trying to find the company's physical location, without success.
And when I tried to call back the people who had offered me loans, I couldn't get through.
But eventually, I did find someone willing to talk about the business. Jack Murray heads Fix Media Group, in Virginia, which has a site called wefixmoney.com. Murray says his company — not unlike eTaxLoan — is really a marketing firm.
"We are a matching service, just like an Expedia is for a travel company or a Hotels.com is for a hotel company," Murray says.
But instead of matching travelers with hotels, Murray matches those who need cash — and can't get it elsewhere — with those willing to lend.
For that, he might get anywhere from $1 to $100 per lead. Murray draws a big distinction between his company and others in the business. He says he's completely aboveboard and works only with partners he trusts.
"We have a pretty limited network of lenders, and we know what each of our lenders is looking for," he says. "So whether it's a certain state or other qualifications or characteristics of the customer, it will match the appropriate lender based on those things."
Murray says neither he nor his lenders resells personal data, like the kind I submitted. But he says that others do, and that's likely what happened in my case. It doesn't take long online to discover there's a whole network of people trying to buy and sell payday loan leads.
None of this surprises Benjamin Lawsky, the superintendent of financial services for New York state and one of many regulators trying to clamp down on payday lending.
"Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis," he told me. "That's when the vultures come out."