This scam is particularly bad because it takes advantage of those unable to obtain traditional bank loans and can least afford to be scammed.
Most people stumble upon the presentation online or learn about the loan offer from ads in local publications or classified sites like Craigslist.
Often, an unethical advance fee loan website will be created and taken down within a couple weeks only to be replaced by another operating under a different name and fake business address.
The websites look professional and might even put the victim through the rigors of filling out loan application forms—often requiring the victim’s bank account and Social Security number.
Eventually, victims are told they are approved for the loan and just need to pay as much as thousands of dollars upfront via money order or wire transfer to pay for insurance or collateral.
Those that pay never get the promised loan and are even sometimes tricked into giving even more money.
Dishonest loan brokers also set out to scam consumers and businesses.
A loan broker may or may not require an advance fee before performing any services. Under the terms of an "advance fee" contract, the fee charged may not be refundable, regardless of whether or not the loan money sought is obtained.
In addition to the advance fee, the contract may state that the client will also pay a certain percentage of the total loan amount, 1 to 5 percent, at the time of the loan becomes effective-if the money for the loan is found by the broker.
Many kinds of business transactions require that an advance fee or a deposit be made before services are provided. Further, some loan brokers provide a legitimate service to their customers. However, BBB strongly advises would-be borrowers to exercise caution before paying advance fees to unknown firms.
BBB offers the following advice to avoid losing money to an online loan company:
BBB works for a trustworthy marketplace by maintaining standards for truthful advertising, investigating and exposing fraud against consumers and businesses.
BBB of Acadiana services the parishes of Acadia, Evangeline, Iberia, Lafayette, St. Martin, St. Landry and Vermilion.