Is there any specific reasons why payday loan companies ask for social security number.

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    I am not an American, but I guess it is normal part of the KYC (Know your customer) process. They must know you are using a true identity, and they will conduct checks on your identity and history especially for possible frauds or defaults, before issuing any credit Jan 10 '20 at 12:28
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    @usr-local-ΕΨΗΕΛΩΝ arguably the main reason is as Daniel has described in his answer, but you are bringing up a good point that's relevant as well, and should probably be written as an answer versus just a comment.
    – dwizum
    Jan 10 '20 at 13:22
  • It's still curious that an Executive at a company called CashOne asks for a so trivial question. From my European point of view, it's like an executive of car insurance company asks why is 3rd party car responsibilty insurance obligatory :-D Jan 12 '20 at 1:10
  • @usr-local-ΕΨΗΕΛΩΝ It could be that Robin knows the answer to this question and just wants to put the Q/A online somewhere.
    – Daniel
    Jan 22 '20 at 19:16
  • Right @Daniel! The point is quite clear in your answer. Thanks! Jan 27 '20 at 11:47

Before lending money, a lender will want to know what the potential borrower's credit history looks like. For typical loans, you might get a better interest rate if you have a strong credit history. For payday loans, you're going to get a terrible interest rate no matter what, but they'll still check for potential major red flags before lending money. It takes something major (like maybe fraud) to get denied a payday loan, but they're still going to check.

Additionally, payday loans are unsecured. That means there's no collateral for the lender to take in the event that the borrower doesn't repay the loan. In order to increase the probability of being paid back, the lender users the borrower's credit as leverage. Failure to pay back the loan will result in a black mark on the borrower's credit report, which will affect their ability to secure loans in the future. This provides negative reinforcement encouraging the borrower to repay the loan.

  • Payday lenders rarely (if ever) run credit checks, that's part of the appeal of the loans. Some states have capped payday loan interest rates, so in some places credit checks might be worthwhile, but in general they don't bother. The 2nd paragraph is true, SSN is required for reporting an unpaid debt to credit bureaus.
    – Hart CO
    Jan 10 '20 at 14:43

All lenders need a way to determine if you are creditworthy. They do so by running your social security number through an independent service that provides verified history of your credit. If you do not provide your SS number, they cannot approve your loan request. Lenders identify you through your social security number.

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