The Number One Fraud Scheme

By Teresa Ambord

Do you know what the number one fraud scheme in America is? It’s called advance-fee loans. If you’ve been a victim, you’re not alone. According to the Federal Trade Commission (FTC) over 4.5 million have Americans fallen for the advance-fee loan scam by paying money to a broker to get a loan or credit card that never materialized. Some paid more than once.

These loans are promoted to people with bad credit or who have been turned down by other, more legitimate lending institutions. The ads almost guarantee acceptance, regardless of credit history. Of course the catch is, you pay a fee upfront. Sometimes the caller will promise a refund if you are denied, or state that the upfront fee will be credited towards repayment if you are approved. But of course, once they’ve got your money the "lender" disappears.

Remember, legitimate lenders do not ask for an upfront fee. Some bona fide loans may require a processing fee or application fee, but it will be relatively small.

Here’s a better idea:

Rather than spending hundreds of dollars to "guarantee" a loan that is most likely bogus, use that money to obtain a secured credit card. The fee is usually $100 to $500 dollars and the card will have a fairly low limit. If you don’t pay your bill on a timely basis, the deposit is used to cover the charges. But… the good news is, if you do pay on time, you can develop a good credit record. Think of it as credit with training wheels. Once you’ve gotten your credit in shape, you should begin to qualify for unsecured credit cards and loan.

Some tell-tale signs of a loan or credit scam:

  • They often advertise by direct mail, by cable TV or radio spots, or in tabloids and classified ads.
  • They list 900 numbers for you to contact them. Not only are you scammed for a loan fee, but the 900 number phone call will appear on your bill. These phone charges can easily exceed $50 for a single call.
  • The name of the company may seem familiar, but that doesn’t mean it is legitimate.
  • The lender asks you to send applications and fees by some delivery service other than the U.S. Post Office. This is an effort to avoid possible mail fraud charges if they are caught.
  • The lender is from another state. Scam operators like to avoid doing business in their home state, where victims can more easily get information about their operations.

The Federal Trade Commission, which monitors wire fraud, offers some keys to avoiding advance-fee scams:

  • Don’t pay a fee based on a promise. It is illegal to solicit loans over the phone and take a fee for the loan before delivering on the promise.
  • The FTC recommends that you hang up on any caller that guarantees a loan before you apply, especially if you know your credit is questionable or if you have no credit.
  • Ignore solicitations by email
  • Never give callers your social security number or credit card numbers by phone unless you are familiar with the company and understand the reason for the request and how the information will be used.

Report the scam

Don’t let the crooks get away with it! If you’ve been victimized by an advance fee loan scam, it is important to report the incident to the FTC so they can act on it. Call this toll free number, 1-877-FTC- HELP(382-4357) or log onto www.ftc.gov and click "Complaint form."

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