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Just When You Thought It Was
Safe...Advance-Fee Loan "Sharks"
A different breed of "loan shark"
is preying on unwary consumers by taking their money
for the promise of a loan, credit card or other extension
of credit.
Advertisements and promotions for
advance-fee loans "guarantee" or suggest that
there's a high likelihood of success that the loan will
be awarded, regardless of the applicant's credit history.
But, to take advantage of the offer, the consumer first
has to pay a fee. And that's the catch: The consumer
pays the fee, the scam artist takes off with the money,
and the loan never materializes.
Legitimate guaranteed offers of credit
do not require payments up front. Legitimate lenders
may require consumers to pay application, appraisal
or credit report fees, but these fees seldom are required
before the lender is identified and the application
completed. In addition, the fees generally are paid
to the lender, not to the broker or arranger of the
"guaranteed" loan.
Legitimate lenders may guarantee firm
offers of credit to credit-worthy consumers, but they
rarely do this before evaluating a consumer's creditworthiness.
Advertisements for advance-fee loans
generally appear in the classified section of daily
and weekly newspapers and magazines. Often, the ads
feature "900" numbers, which result in charges
on your phone bill. Advance-fee loans also are promoted
through direct mail and radio and cable TV spots. The
appearance of ads in media outlets that you recognize
- like your local newspaper or radio station - is no
guarantee of the legitimacy of the company behind the
ad.
The Federal Trade Commission says
you can avoid being bitten by advance-fee loan sharks:
Here's how:
- Don't pay for a promise. It's illegal for companies
doing business by phone to promise you a loan and
ask you to pay for it before they deliver.
- Ignore any ad - or hang up on any caller - that
guarantees a loan in exchange for an advance fee.
Legitimate lenders never "guarantee" or
say that you will receive a loan before you apply,
especially if you have bad credit or no credit record.
- Never give your credit card
or bank account numbers, or Social Security Number,
over the telephone unless you are familiar with the
company and know why the information is necessary.
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