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Advance-fee loan sharks are preying on unwary
consumers, taking their money for the promise of a loan
or credit, and leaving them in hot water. The scam
artists often impersonate legitimate lenders to entice
consumers into falling for their bogus offer.
According to law enforcement agencies in the U.S. and
Canada, ads and promotions for advance-fee loans
suggest or even “guarantee”, that there is a high
likelihood that a loan will be approved, regardless of the
applicant’s credit history. But to take advantage of the
offer, the consumer has to pay a fee. The catch? The
scam artist takes off with your fee, and the loan never
materializes.
Six signs of an advance-fee loan scam
A lender who is not interested in your credit
history. A lender may offer loans or credit cards for
many purposes – for example, so you can start a
business or consolidate your bills. But one who
does not care about your credit record should
worry you. Ads that say “Bad Credit? No problem”
or “We do not care about your past. You deserve a
loan” or “Get money fast” or even “No hassle –
guaranteed” often indicate a scam.
Banks and other legitimate lenders generally
evaluate creditworthiness and confirm the
information in an application before they grant
firm offers of credit to anyone.
Fees that are not disclosed clearly or prominently.
Scam lenders may say you have been approved for
a loan, then call or email demanding a fee before
you can get the money. Any up-front fee that the
lender wants to collect before granting the loan is
a cue to walk away, especially if you are told it is
for “insurance,” “processing,” or just “paperwork.”
Legitimate lenders often charge application,
appraisal, or credit report fees. The differences?
They disclose their fees clearly and prominently;
they take their fees from the amount you borrow;
and the fees usually are paid to the lender or
broker after the loan is approved. What if a lender
says they will not check your credit history, but
wants your personal information, like your Social
Security number or bank account number? Go
somewhere else. They may use your information
to debit your bank account to pay a fee they are
hiding.
A loan that is offered by phone. It is illegal for
companies doing business by phone in the U.S. to
promise you a loan or credit card and ask you to
pay for it before they deliver.
A lender who uses a copy-cat or wanna-be name.
Crooks give their companies names that sound like
well-known or respected organizations and create
websites that look professional. Some scam artists
have pretended to be the Better Business Bureau,
a major bank, or another reputable organization;
some even produce forged paperwork or pay
people to pretend to be references. Always get a
company’s phone number from a published
source, such as the phone book, an online
directory, or directory assistance. Call to check
they are who they say they are. Get a physical
address, too: a company that advertises a PO Box as its address is one to check out with the
appropriate authorities.
A lender who is not registered in your state.
Lenders and loan brokers are required to register
in the states where they do business. To check
registration, call the WI Department of Financial
Institutions at (608) 261-9555 or by visiting their
website at dfi.wi.gov. Checking registration does
not guarantee that you will be happy with a lender,
but it helps weed out the crooks.
A lender who asks you to wire money or pay an
individual. Do not make a payment for a loan or
credit card directly to an individual; legitimate
lenders do not ask anyone to do that. In addition,
do not use a wire transfer service, send money
orders for a loan, or provide payment with a
prepaid debit card or gift cards. You have little
recourse if there is a problem with any of these
transactions, and legitimate lenders do not
pressure their customers to pay in this way.
What to do if you are a victim
If you believe you have been victimized by a fraudulent
advance-fee loan operation, contact DATCP’s Bureau of
Consumer Protection to report the company.
Where to find low-cost help for credit
problems
First, try to solve your debt problems with your
creditors as soon as you realize you will not be able to
make your payments.
If you cannot resolve your credit problems yourself or
need additional assistance, you may want to contact
Consumer Credit Counseling Service (CCCS) – a
nonprofit organization with more than 700 offices
located in 49 states that counsels indebted consumers.
CCCS counselors will try to arrange a repayment plan
that is acceptable to you and your creditors. They also
will help you set up a realistic budget and plan for
expenditures. These counseling offices, funded by
contributions from credit-granting institutions, are
offered at little or no cost to consumers. You can find
the CCCS office nearest you by calling or checking their
website at:
(800) 350-2227
www.cccsonline.org
In addition, non-profit counseling programs sometimes
are operated by universities, military bases, credit
unions, and housing authorities. They are likely to
charge little or nothing for their assistance. Or, you can
check with your local bank to see if it has a listing of
reputable, low-cost financial counseling services near
you.
Carefully review all contract information
Check with the Department of Financial Institutions or
the Bureau of Consumer Protection to find out about
any complaints filed against certain companies or
individuals.