Tips for Consumers: Advance Fee Loan Scams
Advance fee loan brokers are near the top of the Council of Better Business Bureaus' list of most-asked-about businesses. More than 80,000 calls were placed to BBBs nationwide by callers requesting information on these questionable promotions.
Despite BBBs' warnings, many consumers and small businesses continue to lose large sums of money to fraudulent loan brokers. These so-called loan brokers advertise in the newspaper classifieds hoping to attract financially-vulnerable consumers or business owners with the promise of guaranteed, low-interest loans to consolidate or pay off debts and clean-up credit records.
According to BBB files, consumers who have answered such ads were told that their credit application could be taken over the phone and approved within a day. Not surprisingly, all applications were "approved" and consumers were asked to send upfront fees ranging from $25 to hundreds of dollars, supposedly to cover the first loan payment or for other expenses.
Consumers who have sent money to bogus loan brokers report that they never received the loan and never received a refund for the upfront fee. In the past several years, hundreds of fraudulent loan brokers have set up operations across the country, targeted out-of-state victims, collected their money and closed shop. Some have re-opened their doors under different names, hoping to bilk new borrowers while going after old victims for a second time.
BBBs have heard from thousands of victims who have lost money in advance fee loan scams to smooth-talking salespeople. The sales pitch may include pressure to make an immediate decision and a requirement to send money, or give out credit card or bank account numbers. Consumers should never give out any account numbers before checking out the reliability of the company with the BBB. Also before signing for any loan, consumers should have a clear understanding of all the terms in the written agreement.
While the sales pitch may sound believable, consumers and business owners should ask themselves, why would an unknown lender, located in another state, be more likely to provide money than local financial institutions? Borrowers should be wary of any ads or brokers charging advance fees for the mere promise of a loan.
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