This Scam is Like the Nigerian Prince Email--But Believable
By Eric Reed
NEW YORK (
) -- Have you ever seen something like this?...
"Get money fast! Bad credit, no problem! No credit, no problem! We don't care about your past: you deserve a loan today. Approval guaranteed."
If so, then you've probably seen the first steps of an Advance Fee Loan
Scam
.
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An Advance Fee Loan Scam is essentially a more sophisticated version of the old Nigerian prince e-mail. The goal is to shake down an innocent mark of his or her cash with promises of impossible money that will never come. In this case the lure is made more believable by the fact that no one has promised you outright free money, unlike the shockingly generous Nigerian royalty, only a very favorable loan.
According to the Michigan Attorney General, a fee scam generally targets people who have bad or no credit, offering a loan or card regardless of their credit history and often on surprisingly generous terms. Then the scammers go to work.
"
, 'You are qualified but you must send a fee to process your application, pay a security deposit, pay for insurance.' The victim pays the money, and no loan or credit card is issued."
This, in a nutshell, is the entire method of a fee scam: they lure the victim in with promises of easy credit, often catching people unable to find help anywhere else. Then the scammers shake the victim down for as many payments as possible. The scammer asks for fees, deposits, up-front-anything for as long as the victim is willing to pay--and of course never actually delivers. Occasionally they get ambitious and ask for a bank account or social security number to try and draw payments directly. Once the victim catches on and stops paying, the scammer moves on to another target.
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It's effective, straightforward and entirely illegal.
Protecting yourself from a fee scam is, fortunately, not too complicated. As the Federal Trade Commission
, "legitimate lenders never 'guarantee' or say that you're likely to get a loan or credit card before you apply, especially if you have bad credit, no credit or a bankruptcy."
It's also illegal for a lender to ever ask for payment before a loan or credit card has been issued. A lender that wants any kind of fee up front is trying to shake you down.
Unfortunately, not all scam artists look like they work out of a shady alley or their parents' basement. Many of these fee scams operate through slick, professional-looking mailers and websites, placing advertisements that lead to what looks and sounds entirely like a
legitimate opportunity
.
For example this website for
Revenue Lending Services
, pulled from a Google cache since the original has been taken down, could have been operated by anyone's boring, banker dad with a receding hairline, two kids and a mortgage. It wasn't, though.
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Protecting yourself from a fee scam is, happily, relatively easy. According to the FTC keeping an eye out for a few red flags should keep them away from your door,
:
- If they aren't interested in your credit history. Anyone advertising loans for people with bad credit, or plastering "We don't care about your past" on their advertisements is probably not your friend.
- Any up front or hidden fees. If they ask for money before the loan has been issued, walk away. Many lenders do charge application or credit check fees, but those are displayed prominently and taken out of the loan once issued. If someone wants a check from you first, go to a real bank.
- Loans, other than a credit card, offered by telephone.
- Lenders who use "copy-cat or wanna-be" names. If someone is pretending to be a legitimate organization, or using a name that sounds like it's ripped off from one, go somewhere else. No legitimate lender would name themselves the "Best Business Bureau."
- A lender not registered in your state. If they aren't registered locally, there's probably a reason.
- Any lender who asks you to send money directly to an individual at any point in the process. There is simply no reason why you should be ever paying a person, not a company.
When in doubt, the website Great Loans for Bad Credit keeps a running list of identified scam artists on their blog,
. It isn't exhaustive, but it's certainly a place to start.
Eric Reed is a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website
.