Cash advance loans, payday loans or rebates - they are all bad deals.

Legislators all over the country have begun to crack down on the business of payday loans. They are expensive, they are hard to pay off, the terms are often complicated, the lenders aren’t particularly sympathetic, and the businesses seem to prey on those who can least afford misfortune - the poor and enlisted military personnel.

The loans are offered at a seemingly insane rate of interest that averages 474% nationally. The payments are due, in full, in two weeks. If they’re not paid on time, the interest continues to accrue. There are plenty of stories of people who have borrowed a few hundred dollars, repaid several thousand dollars, and were still taken to court over the unpaid balance. Because of the negative press that these businesses have been receiving, some of them have been trying to hide themselves while doing business under a seemingly unrelated line of work. And one of them just got caught and put out of business.

A company doing business at the now defunct Website Acepays.com was offering loans of up to $1000 disguised as “memberships.” The scheme was that people could become “members” of their site and obtain discounts on merchandise offered for sale by the company. There were seven different memberships offered and each one promised greater discounts than the next level down. The highest level, the “diamond” level, offered discounts of up to 60% on merchandise and included a “cash rebate” of $1000.

Now why would anyone join and pay regular fees in order to get a cash rebate? The plan worked like this - A person agreed to join, had regular payments for the “fee” deducted from his or her credit card, and received the $1000 “rebate.” The problem, as the state of Pennsylvania saw it, is that the purpose of the site wasn’t to sell goods at a discount; it was to offer the cash. There were several mentions on the site of how members could “get the cash you need now.”

The state regarded this as a high-interest loan business, and determined that the effective interest rate offered by the company on their “rebates” was in excess of 600% per year, a somewhat exaggerated amount in light of Pennsylvania’s limit of 6%.

So, the state shut them down. The Website is no longer online and the company has promised refunds to some of the customers who were overcharged.

Many of these companies are out there, and consumers should beware of sales pitches that seem too good to be true. Joining a “membership” program for several thousand dollars in order to receive a $1000 “rebate” isn’t a good deal; it’s a complete rip-off. Consumers should watch out, for there will be many more companies like this doing business on the Internet soon.

Copyright © 2005-2007 by Retro Marketing. All rights reserved.