BBB Warns Consumers, Businesses to be Wary of Advance-Fee Loan Schemes

  
     
September 07, 2009

As the U.S. economy slowly gets back on track, the Better Business Bureau is warning consumers and businesses to be wary of companies offering easy loans at favorable rates and asking for payments in advance to secure those loans. These loan offers are not legitimate and are targeted at customers and companies struggling with debt and poor credit, often making bad situations worse.

Advance-fee loan offers have been around for a long time and surge when money and credit are tight. Offers of this nature are usually found online and in the classified sections of newspapers and magazines. Sometimes potential victims are contacted via phone or e-mail. Customers are told they qualify for loans with little or no background check. After filling out all necessary paperwork, they are asked to pay an upfront fee of anywhere from $300 to $3,000. The fee is either paid by wire transfer, often to locations in Canada, or debited directly out of the consumer’s checking account.

It is the experience of the BBB that customers who pay these upfront fees never receive their loans. Generally, once the requested fees are paid the companies making the offers cease contact or change phone numbers.

To protect yourself and your business, your BBB advises the following:

• If you’re asked to pay a fee upfront or wire funds to receive your loan, the offer is not legitimate. According to the Federal Trade Commission, it’s illegal for companies doing business by phone in the U.S. to promise a loan and ask you to pay for it before it’s delivered.

• Be sure to check the company’s reliability report with the Better Business Bureau at wynco.bbb.org.

• Beware of lenders not interested in your credit history and/or advertisements that downplay bad credit.

Remember, the Internet is full of bogus offers. If it sounds too good to be true, it probably is!