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Advance Fee Loans
Per the Federal Trade Commission and the Illinois Attorney General, it is illegal for a company to charge advance fees for a loan before the loan is made. Such "fees" include but are not limited to insurance fees, up-front fees, processing fees, collateral fees, etc.
The FTC advises that a legitimate lender will never guarantee or promise a loan before you apply for one, especially if you have a poor credit history or no credit record at all. These two signals can immediately indicate the illegitimacy of a given company - promises of loan approval prior to receiving a consumer's application and charging advance fees for the loan.
How to recognize an Advance Fee Loan Scam:
Many illegitimate loan company advertisements are found in the classified sections of local and national newspapers, flyers circulated in neighborhoods, radio advertisements, shopping centers, on the Internet, and elsewhere. The ads frequently feature "900" numbers which result in charges on your phone bill, or toll-free "800" numbers. Such companies also frequently use delivery methods other than the US Postal Service in order to avoid being detected and prosecuted by postal authorities.
The Illinois Attorney General states that nearly all of the illegitimate loan businesses establish PO boxes in the United States, but many are actually located in Canada and request that consumers wire money to locations in Canada prior to receiving the alleged loan.
Many consumers report responding to ads that promise loans, even to consumers with poor credit, only to have the company request up-front fees ranging from $100 to several thousand dollars. The consumer might receive very official looking documents, but once he or she wires the advance fees or provides their bank account number to receive an alleged money transfer from the lender, the consumer receives nothing. Upon contacting the company, consumers are then given excuses or the run around, get hung up on, or find that the company's phones have been disconnected.
How to Protect Yourself:
The FCC and the Attorney General advise that unless you are familiar with the company and understand why transmitting certain types of information may be necessary, never give your credit card, bank account numbers or social security number over the phone, vie email, or by other means.
Keep in mind that it is against the law for a company to ask you to pay - or accept payment - for the company's services until you receive your loan, especially when someone who solicits you suggests that they can get or arrange that loan for you. That is a violation of the Telemarketing Sales Rule.
When applying for a real estate loan, it is common practice for lenders to charge for a credit report or appraisal fee, though a legitimate lender will not ask you to pay for processing your application.
If you believe that you have been a victim of an advance-fee loan scam, you are advised to contact your state Attorney General, file a complaint with the FTC, and contact your local BBB. If your transaction involved wiring or otherwise sending money to Canada or outside of the United States, please contact Phone Busters, a Canadian organization working in a joint effort with the FBI and US officials. Phone Busters can be reached at toll-free 1-888-495-8504 or firstname.lastname@example.org