Predatory lending, Advance-Fee Loan Scams, and You!
At Advantage CCS, we provide credit counseling and debt management services to clients who have been the victims of predatory lending. The face of predatory lending varies widely. It can come in the form of a bogus business loan, a student loan scam, or a subprime mortgage. All predatory lending has one factor in common: You, the consumer, are the one who’s going to lose in the end.
The Advance-Fee Loan scam has been around for many years. This scam is all about trying to get people to pay an advance fee at the time of loan approval. The scenario goes something like this: You see a convincing advertisement that guarantees loan approval for bad credit, but you must pay an upfront fee for “processing” or “paperwork”. You pay said fee and they’ve got you! You’ll never receive the loan and your money is gone.
Another scenario is the advance-fee student loan scam. It promises you a great student loan, one with unusually low interest. The problem is to get the student loan; you must first pay a fee. But guess what? After you pay the upfront fee nothing happens! The “promised” loan never materializes and you’re out a few hundred or even thousands of dollars.
Legitimate loan servicers may charge a fee, but invariably they deduct that fee from the loan check. Real loan programs never ever require an upfront fee (out-of-pocket fee) when you submit the loan application. A big red flag is if the loan is NOT issued by a reputable bank or other recognized lender. If that’s the case don’t sign anything and just walk away! You can always show the application to your local branch bank manager and ask for their opinion if you feel uneasy about anything.
Are you in credit counseling because of an advance-fee loan? Don’t make that mistake again!
Don’t fall for credit destroying loan scams, otherwise known as advance-fee loans that have upfront fees attached. Individuals who need credit seek out loans and all seems innocent enough – at first. When the promised loan never materializes, it is usually already too late – the scam artist has made off with the money, and the consumer is left empty handed.
The warning signs that these loans are credit score-ruining scams are numerous. Here are a few red flags that indicate you’re dealing with a scam loan:
- Responsible lenders do not loan money to people without checking their credit score and credit history, nor do they loan to anyone who has a poor credit rating. A lender who doesn’t care about your credit record should worry you. Ads that say “Bad credit? No problem” or “We don’t care about your past. You deserve a loan” or “Get money fast. No credit check!” or even “No hassle — money guaranteed” often indicate a scam and you should stay away from those lenders.
- Responsible lenders also do not require advance payments or upfront fees. Application or credit evaluation fees are ethical, but these fees are part of the total sum borrowed and not paid out-of-pocket. Scam lenders may say you’ve been approved for a loan, then call or email demanding a fee before you can get the money. Any upfront fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”
- Ethical lenders do not ever promise a loan before a consumer even applies. Why would a company risk lending to someone with a bad credit history and bad debt management patterns? They wouldn’t, so it’s a good sign that they aren’t a reputable lender if they say things like “No credit needed!” or “We never do credit checks!” or “Bad credit? No problem!” Do not get a loan from a company advertising like this. It’s almost certainly a scam.
- Good lenders use secure methods of data transmission. They do not ask for your information without guaranteeing a secure server and secure data encryption. Be especially wary of lenders who solicit over the telephone. You likely have no idea who is taking your personal sensitive information – and worse, you can’t control where it ends up. It is illegal for companies doing business by phone in the U.S. to promise you a loan or credit card and ask you to pay for it before they deliver.
- Going with a lender who you’ve never heard of before might not be a good idea. Scammers give their fake companies names that “sound” like well-known or respected organizations, and even create websites that “look” professional. Some scam artists have pretended to be the Better Business Bureau, a major bank, or another reputable organization. Others even produce forged paperwork or pay people to pretend to be references. Always get a company’s phone number and check it out online. Do a search for the company name and read client reviews. It’s also a good idea to call them back to check they are who they say they are. Get a physical mailing address and look it up online to match sure it matches what they say. You can also check with your local BBB or your state’s Attorney General’s office to make sure the company is legit.
- Reputable lenders don’t let you wire money. If you’re asked to pay a fee upfront for a loan through a wire service such as Western Union, you should turn down the offer. There is no accountability for this kind of action, and if something goes wrong with the transmission, you’ll have no recourse. Don’t send a personal check or money order either because you’ll never see that money again. Legitimate lenders don’t pressure their customers to wire money.
Dealing with debt problems!
If you have debt problems and that’s why you’re looking to get a loan, you may want to contact a credit counseling agency such as Advantage CCS. We counsel and educate consumers and their families on debt troubles, budgeting, and using credit responsibly. Our credit counseling services are always 100% free and completely confidential. We can let you know what your debt relief options are and help you get out of debt as quickly as possible.
In conclusion, just because you’ve received an awesome promotion, saw an advertisement for a loan or credit card with super low interest rates in a prominent place in your town or in your local newspaper, on television or somewhere on the Internet, or heard something on the radio, don’t assume it’s a good deal — or even a legitimate offer. Scam artists work hard to make you think they’re genuine, so it’s really important to do your homework. They aren’t above spending someone else’s money on advertising to get even more money from several other people!