No Credit? Bad Credit? Beware of Loan Scams, Warns BBB
June 24, 2010

According to complaints filed with the Better Business Bureau, people across the country lost an estimated total of a quarter million dollars to advance fee loan scams this spring. Advance fee loan scams target individuals and small business owners who are desperate to get a loan and often take the victim for thousands of dollars.

Despite recent improvements, a bad economy continues to provide opportunities for scammers to take advantage of struggling individuals and small business owners. Lending standards remain stringent at most banks and many cash-strapped individuals are turning to fraudulent lenders that promise loans regardless of your credit history.

Most people learn about a bogus loan offer from ads in local “penny saver” publications or stumble upon the scam online. Often, a bogus 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 their bank account and Social Security numbers. Eventually victims are told they are approved for the loan, but must first pay sometimes thousands of dollars upfront. Individuals are told to send the money by money order or wire transfer as collateral or to pay for insurance. Those that pay never get the promised loan and are sometimes tricked into giving the scammers even more money.

BBBs across the U.S. have recently received complaints about advance fee loan scammers operating under more than 75 different names, including Capital Alliance Financial Group, Harford Financial Services, Howard and Clark Financial, Lending Hand Financial, among others. Because these scammers tend to set up, disappear and re-emerge with fake names, websites and addresses, Hawaii’s BBB was unable to locate more than half of the advance fee brokers with complaints filed by local residents in the past three years.

BBB advises cash-strapped individuals and small business owners to recognize the red flags of an advance fee loan scam:

  • The lender has a bad reputation—or none at all. Research the lender thoroughly online and with your BBB. Most trustworthy lenders have an established track record, so be wary if you can’t find much information about the lender online.
  • The lender asks you to wire money or send a money order—such as for insurance or collateral—before you can receive the loan. You might be told to wire money to another country, consider this yet another red flag.
  • The lender is not registered to do business in Hawaii. If the company offers specialized services, such as credit repair, loan modification, debt settlement, or foreclosure rescue services, state or federal laws prohibit charging upfront fees.

If you or someone you know has become a victim of an advance fee loan scam, report the incident to Hawaii’s BBB.