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
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.
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. 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.
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.
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 the phone book or directory assistance, and 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
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
Wisconsin Department of Financial Institutions at (800) 452-3328. Checking
registration does not guarantee that you will be happy with a lender, but it
helps weed out the crooks.
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 or send money
orders for a loan. You have little recourse if there is a problem with a wire
transaction, and legitimate lenders do not pressure their customers to wire
What to do if you are a victim
If you believe you have been victimized by a fraudulent
advance-fee loan operation, contact the Bureau of Consumer Protection to report
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 or 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 or consumer protection 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.