Advance Fee Loans and Creditor Scams

The Not-so-Credible Creditors
For consumers, repairing inaccurate credit report information can be stressful and time consuming. When inaccuracies on your credit report make it difficult to qualify for a loan or lower interest rates, it is easy to understand why the lure of 'guaranteed loans' from some lenders is so enticing.

Knowing that nearly 80 percent of Americans have errors on their credit reports, opportunistic con artists, posing as legitimate lenders, make loan offers that sound too good to be true and are hard to resist. Unfortunately, the offers are usually too good to be true, which is why you should be aware of the tactics employed by these unethical businesses and individuals who present themselves as the ultimate solution for those suffering from poor credit scores.

Beware of Advance Fee Loan Scams
You may see a variety of advertisements promising loans in the classified section of local and national newspapers, magazines, and on the Internet. The ads also surface on local cable stations, radio, and fliers. Often, these ads feature ‘900’ numbers (which result in charges on your phone bill), or toll-free ‘800’ numbers.

The point to remember is that anyone can advertise in recognized media outlets or on the Internet. A marketing blitz with slick ads does not guarantee the legitimacy of the product or company behind the ad. In addition, con artists and unethical companies often use delivery systems other than the U.S. Postal Service, such as overnight or courier services, to avoid detection and federal prosecution by postal authorities.

Guaranteed Loans
Some companies claim they can guarantee you a loan for a fee paid in advance. The fee may range from $100 to several hundred dollars. (Small businesses and individuals have paid – and lost – several thousand dollars as an advance fee for a loan.) Whether you are an individual consumer or an owner of a small business, the result is the same: the only one receiving money is the con artist. And once the con artists get your money, they disappear.

Don't confuse a legitimate pre-approved credit offer with a legitimate pre-qualified offer from mortgage brokers, banks, savings and loans, and credit unions. A pre-approved offer requires only your verbal or written acceptance. A pre-qualified offer means you've been selected to apply. However, you still must go through the normal application process, and you still can be turned down.

Equal Credit Opportunity
Credit is used by millions of consumers for a variety of reasons. The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit. This means that all consumers who apply for credit will get equal consideration. The applicants' creditworthiness will be determined according to factors such as income, expenses, debt, and credit history.

The law protects you when you deal with any creditor who regularly extends credit, including banks, small loan and finance companies, credit unions, department and retail stores, and credit card companies. Anyone involved in granting credit, such as real estate brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law.

To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.