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The
Truth About Advance-Fee Loan Scams
The vast majority
of lenders are owned and managed by legitimate professionals.
But fraudulent loan brokers and other individuals misrepresenting
the availability of credit and credit terms definitely are in
business. One of their favorite strategies is the "advance-fee"
loan. That's when they guarantee you'll get a loan or other type
of credit - but you must pay before you apply.
Recognizing
An Advance-Fee Loan Scam
Advertisements that promise loans generally appear in the classified
section of local and national newspapers and magazines, and on
the Internet. They also may appear in radio advertisements, on
local cable stations, and in flyers circulated in neighborhoods,
shopping centers and at military bases. Often, these ads feature
"900" numbers, which result in charges on your phone
bill, or toll-free "800" numbers. Unfortunately, advertising
in recognized media outlets or on the Internet does not guarantee
the legitimacy of the company behind the ad. In addition, these
companies often use delivery systems other than the U.S. Postal
Service, such as overnight or courier services, to avoid detection
and prosecution by postal authorities.
Some companies
claim they can guarantee you a loan for a fee paid in advance.
The fee may range from $100 to several hundred dollars. Indeed,
small businesses have been charged as much as several thousand
dollars as an advance fee for a loan. Whether you are an individual
consumer or an owner of a small business, the result is the same:
you don't get your money; the con artist does. And once con artists
get your money, they disappear.
Don't confuse
a legitimate pre-approved credit offer with a legitimate pre-qualified
offer from mortgage brokers, banks, savings and loans, and credit
unions. A pre-approved offer requires only your verbal or written
acceptance. A pre-qualified offer means you've been selected to
apply. However, you still must go through the normal application
process, and you still can be turned down.
Protecting
Yourself
According to the Telemarketing Sales Rule, if someone guarantees
or suggests that there is a strong chance they can get or arrange
a loan or other form of credit for you, it's against the law to
ask you to pay - or accept payment - for their service until you
get your loan or credit.
Here are some
points to keep in mind before you respond to ads that promise
easy credit, regardless of your credit history:
Legitimate
lenders never "guarantee" or say that you are likely
to get a loan or a credit card before you apply, especially if
you have bad credit, no credit, or a bankruptcy.
If you apply for a real estate loan, it is accepted and common
practice for lenders to request payment for a credit report or
appraisal. However, legitimate lenders never ask you to pay for
processing your application.
Never give your credit card account number, bank account information,
or Social Security Number over the telephone or Internet unless
you are familiar with the company and know why the information
is necessary.
If you don't have the offer in hand or confirmed in writing and
you are asked to pay, don't do it. It's fraud and it's against
the law.
If You Are A Victim
If you think you've been a victim of an advance-fee loan scam,
contact your local consumer protection agency, state Attorney
General or local Better Business Bureau (BBB) to report the company.
The FTC works
for the consumer to prevent fraudulent, deceptive and unfair business
practices in the marketplace and to provide information to help
consumers spot, stop and avoid them. To file a complaint or to
get free information on consumer issues, visit www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.
The FTC enters Internet, telemarketing, identity theft and other
fraud-related complaints into Consumer Sentinel, a secure, online
database available to hundreds of civil and criminal law enforcement
agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION FOR THE CONSUMER
1-877-FTC-HELP www.ftc.gov
Finding Low-Cost
Help for Credit Problems
It's a good idea to try to solve your debt problems with your
creditors as soon as you realize you won't be able to make your
payments. If you can't resolve your credit problems yourself or
need additional help, you may want to contact a credit counseling
service. There are nonprofit organizations in every state that
counsel and educate individuals and families on debt problems,
budgeting and using credit wisely. These organizations work directly
with your creditors to help resolve your debt problems by negotiating
a repayment schedule that is affordable for you and acceptable
to the creditor. There is little or no cost for these services.
Universities,
military bases, credit unions, and housing authorities also may
offer low- or no-cost credit counseling programs. Check the white
pages of your telephone directory for a service near you.
For More Information
To learn about your rights under the Telemarketing Sales Rule
and how to protect yourself from fraudulent telephone sales practices,
request a free copy of Straight Talk About Telemarketing. Contact:
Consumer Response Center, Federal Trade Commission, 600 Pennsylvania
Avenue, NW, Washington, DC 20580; toll free, at 1-877-FTC-HELP
(382-4357); TDD 1-866-653-4261.
The following
organizations have additional information.
American Financial
Services Association
Education Foundation
919 Eighteenth Street, NW
Washington, DC 20006
www.afsaef.org
National Association
of Consumer Agency Administrators
1010 Vermont Avenue, NW, Suite 514
Washington, DC 20005
Navy Personnel
Command
Personnel and Family Readiness (PERS-662C3)
5720 Integrity Drive, Building 768
Millington, TN 38055-6620
This
article was republished from the website of the Federal Trade
Commission at www.ftc.gov
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