Avoid Upfront Fee Loan Scams
November 23, 2007
There are a lot of scams out there, all of them aimed at taking your money. The BBB (Better Business Bureau) is currently warning consumers of an old scam that dates back a long way. Like most illegal activities, it is making its way back with some force. The scam is often called an advance-fee loan scam.
Consumers should understand that lenders cannot guarantee anyone a loan in exchange for money that is paid upfront to the lender. In other words, if a lender asks you send money and they in return will guarantee you a loan or a credit card or a line of credit, you are about to be robbed.
The BBB reports that many consumers across the country have filed complaints about a Chicago-based company. The complaints allege that the company asked for advance fees that ranged anywhere from $700 to $2,775 in exchange for guaranteed loans. The consumers sent in their cash, but not a single person got their loan from the company. Normally, in scams like this they do not get their money back either. They get nothing.
One of the hallmarks of these types of scams is the people who are most often approached by the scam companies. It is sad but most of the people who are talked into these scams are those who can least afford to lose money. The unemployed, those on fixed incomes, the poor, and those with bad credit histories will often find themselves the target of these crooks.
The methods of getting to these people can vary. It may come as a friendly phone call to the person, it may appear in printed ads, and it is becoming more popular than ever to appear on the web. The most aggressive pitches usually come from telemarketers who will call the person and promise them not only the loan or credit card but also some type of free gift.
One of the most popular ways to get a scam offer is through the promise of a credit card. This can be confusing for some consumers because there are legitimate offers for secured credit cards that do require the consumer to put their own money into an account. In a legitimate secured credit card offer your credit limit will be the amount of money that you put into the account and no more than that.
If a consumer receives a call or a printed mailer that states that by placing a certain amount of cash into an account the person will be guaranteed a credit card with a credit limit higher than the amount deposited, the consumer should be wary. This is not how secured credit cards operate.
While it is important to be careful while applying for secured credit cards, it is equally important to be on the watch for scams associate with so-called unsecured credit cards. Virtually no reputable credit card company asks for any kind of money upfront when you apply for a credit card. If they do, watch out.
Another way that this scam is used is on those people looking for help with mortgage payments. This can be tricky because there are times when reliable and reputable mortgage bankers or brokers will ask for money in order to process your loan. The key to remember is that this money is usually only due at the closing and it is not normally required “upfront”.
If all this sounds confusing, there are some caution signs to look out for:
- Always be wary of companies that promise a loan despite bad credit, unemployment, or bankruptcies. The truth is lenders will base their decision to loan you money on your credit history.
- Be wary of anyone who promises you a loan even before they have checked your credit. This is simply not done in these day and age.
- If a loan company asks you to send them money as a processing fee, be careful. Be especially careful if they ask for a lot of money. This is a sure sign that they are about to rip you off. In some cases a reputable company may ask you to pay for the credit check but that amount is usually small. You should also know that most credit card companies never charge for credit checks.
- Do not fall for the old: We will return your money if you are not satisfied trick. They have no intention of returning your money. When you are dealing with scams, understand that they will say anything to lure you in.
- Do not use 900 phone numbers. These calls are charged to you and they can be incredibly expensive. The people you are calling make a commission off of these calls and they love to keep you on the phone for as long as possible.
- If they ask you to forward your payment by some method other than U.S. mail, do not do it. They are probably trying to avoid mail fraud laws.
Many advance-fee loan scams originate in Canada and the Caribbean.
Never give out your social security number, PIN, bank account number or credit card number over the phone, unless you initiated the call