Advance fee loans are usually, if not always, empty promises of a personal or business loan requiring payment of a fee in advance.
Fraudulent advance fee loan schemes generally prey on vulnerable consumers — the unemployed, those who have bad credit ratings, or those in immediate need of money for emergencies.
Ads promising “money to loan . . . regardless of credit history” lure consumers into paying fees that range from $25 to several hundred dollars, in advance of supposedly receiving loans that are “guaranteed.” Often, these ads feature “900” numbers, which result in charges on your phone bill, or toll-free out-of-state or country “800” numbers.
The fee may be called “processing”, “application” or “first month’s payment”.
While legitimate lenders may require you to pay application, appraisal, or credit report fees, these fees are never required before the lender is identified, and the application is completed.
In addition, the fees are generally made payable to the lender, not the broker or arranger of the supposed “guaranteed” loan or extension of credit.
In most instances, you never receive the promised loan and either never hear from the loan company again or are later told by “turn down room” — a third-party that denies applications for loans and other credit — that you are ineligible for the credit.
Small businesses have been charged as much as several thousand dollars as an advance fee for a larger loan.
Whether you are an individual or the owner of a small business, the result is the same: you don’t get your money; the con artist does.
In the U.S. it’s against the law to ask for money up front to help obtain a loan.
The money must be in your hands for seven days before payment can be requested. This is the same for either a direct loan or through a third party.
Get loan offers in writing, shop around, then compare promises to the written agreement.
There is free or low-cost help with your credit available at U.S. Consumer Credit Counseling Service at 1-800-388-2227.
Larger Business Loan Frauds
It is, however, not always the underprivileged that are targeted.
Recent cases have shown where businessmen seeking multi-million-dollar loans for ventures, which have been rejected by more conventional lenders, have lost hundreds of thousands of dollars each ($250-750k) in advance fee losses.
A specific example and interworking’s can be found described in detail at 8:2017cv01883 Sam Assaf et al v. Robert Carp et al California Central District Court, where Richard Provost owner, principal, or manager of; Luxury Financial Solutions, The Property Masters and PMBC Home Buyers has been charged in United States District Court in California with several counts of civil Fraud. Specifically: fraud by inducement, fraudulent misrepresentation, fraudulent concealment, civil conspiracy, and unjust enrichment…
Drawn in by the impressive executive offices and apparently affluent connections of high-flying brokers, these entrepreneurs, upon paying, were soon faced with delays, evasions, and excuses. This ultimately led to the disappearance of the perpetrators along with the funds collected.
Occasionally a Ponzi structure needs to be established to work this scam, but fabricated word-of-mouth success stories will usually do the trick.
The Money Is On The Way
Desperately in need of cash you respond to one of several ads you’ve seen in the classified advertising sections of tabloids such as Star, Enquirer and Globe magazines and local newspapers.
LICENSED LOAN BROKER
Fast Cash. Easy qualifying loans from $1,000-$25,000.
Bad credit / no credit OK.
Call (800) 771-9322
WWW.BSLNET.COM/ACCOUNTS/PFS/WWW/INTRO
Thousands of callers nationwide who responded to the ad’s 1-800 number were asked for personal and financial information, told they could borrow up to 20% of their incomes and were instructed to call back in 45 minutes to see if they had qualified for a loan.
After calling you end up talking to a loan dealer who asks for more of your credit history information over the phone, then tells you that your loan application has been “approved”, that you have “qualified” for the loan, or that your bad credit is not a problem and that there is a high likelihood that the lenders will be successful in obtaining a loan for you.
He requires you to submit certain identification and credit-related information in writing, along with an advance “processing” fee of $199, paid by money order or cashier’s check, delivered to the loan dealer’s address by an overnight courier service.
Once the money is received, he tells you that your file has been forwarded to the actual lending organization.
They subsequently notify you by mail that your loan application has been officially referred on and thank you for your business.
They provide the “lender” with your name and address, along with payment for the “turndown” service.
The supposed lender in turn requests from you another $15 to obtain your credit report plus another “processing” fee of $89.
Subsequently, upon payment of these fees, they send you a notice stating that an unidentified “private lender” has denied your loan request.
The “lenders” were actually “rejection mills” or independent fraudulent entities that, for a set fee paid by the fraudulent telemarketers, pretend to be lenders by sending forms and letters to loan applicants.
Unaware of this, you advise them about the loan dealers’ practice of guaranteeing loans and requiring an up-front fee, yet they continue to decline your application which they never had any intention of fulfilling. None of the more than 5,000 loan applicants who sent advance fees received the loans.
Remember these tips:
• Be sure to contact your state or regional Department of Banking BEFORE giving any of your hard-earned money to a lender. Find out FIRST if they are legitimate.
• Don’t pay for a promise. It is illegal for brokers of unsecured loans 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.
The Federal Trade Commission (FTC) provides additional information about Advance-Fee Loan Scam at http://www.ftc.gov/bcp/edu/pubs/consumer/telemarketing/tel16.shtm
If You Are a Victim
If you think you’ve been a victim of an advance-fee loan scam, contact the Department of Banking at https://portal.ct.gov/DOB/Consumer/Consumer-Complaints/Consumer-Assistance
The Canadian Anti-Fraud Centre (CAFC) is also a valuable resource for reporting fraud and suspected scams. The CAFC is the central agency in Canada that collects information and criminal intelligence on such matters as mass marketing fraud (e.g., telemarketing), advance fee fraud, Internet fraud and identification theft complaints. You may contact PhoneBusters toll-free at 1-888-495-8501 or CAFC at http://www.antifraudcentre-centreantifraude.ca/index-eng.htm