Easy Credit? Not So Fast
The Truth About Advance-Fee Loan Scams
The vast majority of lenders are owned and managed by legitimate professionals.
But fraudulent loan brokers and other individuals misrepresenting the
availability of credit and credit terms definitely are in business.
One of their favorite strategies is the "advance-fee" loan.
That's when they guarantee you'll get a loan or other type of credit
- but you must pay before you apply.
Recognizing An Advance-Fee Loan Scam Advertisements that promise loans
generally appear in the classified section of local and national newspapers
and magazines, and on the Internet. They also may appear in radio advertisements,
on local cable stations, and in flyers circulated in neighborhoods,
shopping centers and at military bases. Often, these ads feature "900"
numbers, which result in charges on your phone bill, or toll-free "800"
numbers. Unfortunately, advertising in recognized media outlets or on
the Internet does not guarantee the legitimacy of the company behind
the ad. In addition, these companies often use delivery systems other
than the U.S. Postal Service, such as overnight or courier services,
to avoid detection and prosecution by postal authorities.
Some companies claim they can guarantee you a loan for a fee paid in
advance. The fee may range from $100 to several hundred dollars. Indeed,
small businesses have been charged as much as several thousand dollars
as an advance fee for a loan. Whether you are an individual consumer
or an owner of a small business, the result is the same: you don't get
your money; the con artist does. And once con artists get your money,
they disappear.
Don't confuse a legitimate pre-approved credit offer with a legitimate
pre-qualified offer from mortgage brokers, banks, savings and loans,
and credit unions. A pre-approved offer requires only your verbal or
written acceptance. A pre-qualified offer means you've been selected
to apply. However, you still must go through the normal application
process, and you still can be turned down.
Protecting Yourself
According to the Telemarketing Sales Rule, if someone guarantees or
suggests that there is a strong chance they can get or arrange a loan
or other form of credit for you, it's against the law to ask you to
pay - or accept payment - for their service until you get your loan
or credit.
Here are some points to keep in mind before you respond to ads that
promise easy credit, regardless of your credit history:
Legitimate lenders never "guarantee" or say that you are
likely to get a loan or a credit card before you apply, especially if
you have bad credit, no credit, or a bankruptcy. If you apply for a
real estate loan, it is accepted and common practice for lenders to
request payment for a credit report or appraisal. However, legitimate
lenders never ask you to pay for processing your application. 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 Are A Victim
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.
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