Loan sharks that require a upfront fee are preying on unwary consumers, they are taking their hard earned money for the promise of credit or a loan, which leaves the consumer
in hot water. These scam artists often impersonate lenders that are legitimate and entice unwary consumers into falling for their offer that is bogus.
According to the agencies of law enforcement in Canada and in the United States, promotions and ads for advance fee loans guarantee or suggest that there is a high probability that they will be approved for a loan, no matter what is on a applicant's credit history. In order for a consumer to take advantage of the offer, they are required to pay a fee. So do you want to know what the catch is? The loan never materializes and the scam artist takes off will your fee.
Advance fee loans are mostly promoted in the classified ad sections of weekly and daily magazines and newspapers. The ads often feature toll-free 866, 800 or 877 numbers, or area codes from Canada, such as 647, 416, 705, or 905. These loans are promoted also through the radio, direct mail, and spots on cable television. The fact that an ad is in a media outlet that is legitimate, like the local radio station or newspaper will not guarantee that a trustworthy company is placing it.
Legitimate offers of credit do not require a payment up front. Although legitimate lenders may charge appraisal, application or credit report fees, these fees are normally taken from the borrowed amount. The fees are also typically paid to the broker or lender after the loan is approved. Lenders that are legitimate may guarantee firm offers of credit to consumers who are credit worthy, but first, they evaluate the creditworthiness of the consumer and confirm the information on the credit application. Canadian law emphasizes caution that it is highly unlikely that lenders in Canada that are legitimate would take a risk on U.S. citizens whose credit problems preclude them from getting a loan in the United States.
Often, these advance fee loan sharks claim that their fees will go to a third party for credit insurance or a related service. Sometimes, they even fax materials using forged or stolen letterheads and logos from companies that are legitimate. According to enforcement officials, the materials are fakes, and the contracts the scam artists ask consumers to sign are worthless. Adding insult to injury, some scammers have used the information they collect from consumers to commit identity theft.
Also, advance fee loan scammers often direct applicants to send the fees thru money transfers at Western Union that is payable to an individual, rather than a business. They ask applicants to use a password code with their Western Union payment, which allows the scammers to hide their identity.
Canadian and U.S. law enforcers say consumers can avoid being taken by advance fee loan sharks. Here's how:
1) Don't pay for the promise of a loan. It's illegal for companies doing business by telephone in the United States to promise you a loan and ask you to pay for it before they deliver. Requiring advance fees for loans is also illegal in Canada.
2) Hang up on any caller and ignore any ad that promises a loan in exchange for a fee in advance.
3) Remember that lenders that are legitimate will never guarantee or say that you will receive a loan before you apply, or before they have contacted your references or checked out your credit status, especially if you have no credit or a bad credit record.
4) Don't give your bank account, credit card, or Social Security number over the phone, by fax, or via the Internet unless you know why the information is necessary and you are familiar with the company.
5) Don't make a payment to an individual for a loan; no lending organization that is legitimate would make such a request.
6) Don't send money orders or wire money for a loan through Western Union or similar companies. You have little recourse if there's a problem with a wire transaction. Legitimate lenders don't pressure you to wire funds.
If you are not absolutely sure who you are dealing with, get the company's number from directory assistance or in the telephone book, and call it to make sure you are dealing with the company or organization that you think you are. Some scam artists have pretended to be the Better Business Bureau or another legitimate organization. Check out questionable ads by calling Project Phonebusters in Canada toll-free at 1-888-495-8501. If you live in the United States and think you have been a victim of an advance fee loan scam, report it to the Federal Trade Commission online at ftc.gov or by phone, toll-free, at 1-877-FTC-HELP (1-877-382-4357).