Fraudulent loan companies are happy to take your money, if you're
willing to take the bait for a "guaranteed" loan.
The vast majority of lending institutions are legitimate. But a bad apple
spoils the bunch, as the saying goes, and one fraudulent loan broker can take
hundreds of unsuspecting consumers to the cleaners before getting caught.
Fortunately, you can steer clear of the most common scams by understanding
how the racket is played. One favorite scam is the advance-fee loan, where a
seemingly legitimate company guarantees your loan, regardless of your credit
history, as long as you pay a fee upfront as high as several hundred dollars.
Sound too good to be true? It is. They take your money and run.
Here's how to recognize this scam. An advertisement or promotion says it
will guarantee or promise approval for a loan but to take advantage of it,
you must first pay a fee. For personal loans, it can be several hundred
dollars while small businesses can be charged several thousand.
Unfortunately, advertising in recognized media outlets or on the Internet
does not guarantee the legitimacy of the company behind the ad. These ads
can appear in the classified section of local and national newspapers and
magazines, radio advertisements, local cable stations, and even on flyers
circulated in neighborhoods, shopping centers and at military bases. Often,
these ads feature "900" numbers which result in the first rip-off: charges on
your phone bill, or they offer toll-free "800" numbers.
Legitimate lenders may guarantee firm offers of credit to consumers but
rarely before evaluating your creditworthiness. Remember that a bona fide
offer of credit does not require payments up front. While legitimate lenders
may require consumers to pay application, appraisal or credit report fees,
these fees are not usually required before the lender is identified and the
application completed. In addition, the fees generally are paid to the
lender. Be highly skeptical if the money goes directly to the broker or
arranger of the "guaranteed" loan.
Fortunately, federal laws are clear about what you can and cannot do when
marketing to consumers in this area. According to the Telemarketing Sales
Rule, if someone guarantees or suggests they can arrange a loan or credit for
you with few questions asked, it's against the law to ask you to pay - or for
them to accept payment - for the service until you actually get your loan or
credit. Never give your credit card account number, bank account
information, or Social Security Number over the telephone or Internet unless
you are familiar with the company and know why the information is necessary.
If you don't have the offer in hand or confirmed in writing and you are asked
to pay, don't do it. It's fraud and it's against the law.
If you think you've been a victim of an advance-fee loan scam, contact your
local consumer protection agency, state Attorney General or local Better
Business Bureau (BBB) to report the company.
Sources used to create this article include the Federal Trade Commission,