How to Spot and Avoid Predatory Financial Products and Services

When you’re facing financial pressure, it can be tempting to say “yes” to the first offer of help—especially if it promises fast cash or an easy way out. But not all financial products are created with your best interest in mind. In fact, some are designed to trap you in a cycle of debt, confusion, and long-term harm. These are known as predatory financial products, and they’re more common than you might think.

Let’s break down how to recognize these products, who they tend to target, and how you can protect yourself—and your future.

What Are Predatory Financial Products?
Predatory financial products are services or loans that come with high costs, hidden traps, and little to no benefit for the consumer. They often seem helpful at first but end up causing more financial harm than good.

Some common examples include:

• Credit repair and debt settlement scams,
• “Buy now, pay later” programs with penalties buried in the fine print,
• Subprime credit cards with sky-high fees,
• Payday and auto title loans,
• Refund anticipation loans, and
• Rent-to-own agreements with unclear terms.

What makes these products predatory is their structure: they are built to exploit financial stress—not relieve it.

Red Flags to Watch Out For 
Here are some signs that a financial product might be predatory:

• Suggesting you stop making payments on debts (especially if you are current!).
• Disputing, or advising you to dispute accurate information on your credit report. 
• Extremely high interest rates or fees (especially for small-dollar loans).
• Pressure to act fast with phrases like “limited time only” or “guaranteed approval”
• Lack of transparency—you’re not given clear, written terms up front.
• No credit check required (often means it’s risky and expensive).
• No path to long-term financial improvement (the product solves a short-term need but leads to ongoing debt).
• Unlicensed or unregistered providers.

If a product sounds too good to be true, or if it makes you feel rushed or confused, those are signs to slow down and ask questions.

Who’s Most at Risk?
Predatory lenders often target people who are:

• Experiencing a financial crisis,
• Unbanked or underbanked,
• Living paycheck to paycheck,
• Immigrants or people with limited English proficiency, and
• From communities historically excluded from fair financial access.

It’s not about poor choices—it’s about limited options. That’s why awareness, education, and access to safe alternatives are so important.

What Are Safer Alternatives?
Fortunately, there are trusted and affordable alternatives that can help you build credit, manage debt, or access emergency funds:

• Credit builder loans from community banks, credit unions, or non-profit organizations,
• Secured credit cards with low or no annual fees,
• Debt management plans (DMPs) through certified nonprofit credit counseling agencies,
• Bank On certified bank accounts with no surprise fees, and
• Financial coaching and education from nonprofits like ours.

Before saying yes to a loan or financial service, look for options that are transparent, regulated, and focused on your long-term success.

How to Protect Yourself
Here are a few quick tips to stay safe:

• Research the provider—look them up on sites like the CFPB complaint database or Better Business Bureau.
• Read fine print, especially around fees and repayment terms.
• Ask questions, what happens if you miss a payment? How will this impact your credit?
• Talk to a nonprofit counselor before signing anything. A 30-minute call could save you years of trouble.

Final Thoughts
You work hard for your money. You deserve financial tools that work just as hard for you, not against you. Predatory financial products often prey on stress, urgency, and confusion, but you don’t have to navigate this alone.
If you’re unsure about a loan, credit card, or financial offer, talk to AFS first. Our certified counselors can walk you through the pros and cons and help you make the best decision for your future. You are not alone! Get Started Today!
 

Published May 21, 2025.