If you are looking for a loan, but have been turned down for traditional financing due to poor credit, advance fee loans may be a tempting alternative. However, be aware that advance fee loan scams are illegal in the United States and Canada. Better Business Bureau (BBB) advises people who are in need of a loan to search locally for a reputable lender. If you are unable to receive a loan locally, chances are you will not be eligible for a legitimate loan elsewhere.
Here’s how the scam works:
The consumer seeks out information on obtaining a loan, typically either online or through the phone. After an “application” process, the consumer is notified they have been approved for a loan and will receive the money after they pay a fee. The “fee” is allegedly needed to cover the first loan payment or for “security and/or insurance.”
The loan applicant is instructed to wire the money or send a money order. Once the money is wired, contact ceases and no loan is ever provided. Advance fee loan companies commonly use a U.S. address (often a P.O. Box) but consumers are directed to wire their fee to a Canadian or other foreign address.
Your BBB and the Federal Trade Commission (FTC) offer the following points to keep in mind before you respond to ads that promise easy credit regardless of past credit history:
- Legitimate lenders never guarantee that you will get a loan before going through an application process - especially if you have bad credit, no credit or a bankruptcy.
- Never give your credit card account number, bank account information or Social Security number over the phone or internet unless you have checked out the company and know why the information is necessary.
Be wary of a lender who:
- Pressures you to act immediately.
- “Guarantees” your loan approval.
- Refuses to provide a street address or physical location.
- Demands that you send money before your offer is confirmed in writing.
- Sends written communications containing typos and grammatical errors.
And lastly, if you don’t have an offer in hand confirmed in writing, and you are asked to pay - DON’T DO IT! It’s fraud and it’s against the law!
If you think you have been a victim of an advance fee loan scam, contact your BBB, the Alabama Attorney General’s Office and the Internet Crime Complaint Center (ic3).