- 2015 Federal Election
Beware of loan scams
Marianne is struggling to make ends meet and has a great business idea she hopes will improve her financial situation. She needs some start-up money, but none of the banks will give her a loan because she has a poor credit history. She responded to an ad in her local newspaper offering cash advances for small business ventures, regardless of credit history. They said they would lend her $10,000 if she wired $500 as a security deposit. Marianne took a cash advance on her credit card and sent the money.
She never received the loan or her $500 back.
Marianne was the victim of an advance fee loan scam. The scammer promises to lend money in exchange for a fee paid up front. This fee is often disguised as the “first loan payment” or for “security” or “insurance,” or as a “premium,” “processing,” or “finder’s fee.” Although legitimate lenders may charge a fee, the fee is always included in the loan amount. You should never have to pay cash in advance to get a loan.
Unfortunately, scams like these are flourishing since the economic downturn, and the victims are those who can least afford it. Ads for guaranteed loans for people with bad credit or no credit appear online, in newspapers and on TV. The Better Business Bureau estimates that individuals in the U.S. and Canada lost a quarter of a million dollars to advance fee loans scams last spring.
What should you be on the lookout for? Warning signs include guaranteeing you a loan, even if you have bad credit, no credit or have declared bankruptcy; requiring you to wire money before you can have a loan offer confirmed in writing and pressuring you to act immediately.
Before agreeing to any financial agreement, always make sure it is a reputable company. Do some research and contact the Better Business Bureau at 1-888-803-1222 or the Canadian Anti-Fraud Centre at 1-888-495-8501 to see if they have had any reports about the company, and never pay cash up front for a loan.
If you’ve been the victim of an advance fee loan scam, report it to your local police, as well as to the Anti-Fraud Centre and the Better Business Bureau.
Amy Taylor is Coordinator of the Kootenay Boundary Credit Clinic, a project of Castlegar and District Community Services Society. The Clinic provides free information and workshops about issues related to money management, credit and debt. Call 1-877-565-0013 or go to www.kbcredit.org for more information.