Advance Fee Loan Scam
As you evaluate home and construction loan products, we urge you to be aware of a common form of fraud known as "Advance Fee Loan Scams.” Advance fee loan scams typically involve the offer of a large sum of money in return for a small payment. If a victim makes the payment, the scammer will often disappear completely, or attempt to get additional payments from their victim.
Six Signs of a Scam
To avoid advance fee loan scams, be on the lookout for these six red flags from the Federal Trade Commission:
A lender who isn’t interested in your credit history. Claims of “Bad credit? No problem!” or “Get Money Fast—No Hassle!” often indicate a scam. Banks and other lenders generally evaluate creditworthiness and confirm the information on the application before offering credit to anyone.
Fees that aren’t disclosed clearly. Scam lenders may tell you that you’ve been approved for credit, but later contact you demanding a fee in order to receive the money. This is your cue to walk away! Any fee that the lender wants to collect before granting the loan is a red flag.
A loan that is offered by phone. It is illegal for companies doing business by the phone in the United States to promise you a loan or credit card, but requires payment before delivering it.
A lender who uses a copycat name. Scammers create “companies” that sound like well-known or respected organizations. They create websites that look professional. They forge paperwork and hire people to pretend to be references. Some scammers have posed as the Better Business Bureau, a major bank and other reputable organizations by using these tactics. Always look up the company’s phone number in the phone book or verified directory and call to ensure that they are who they say they are. Verify that the physical address is correct, too.
A lender who is not registered in your state. Lenders and loan brokers are required to register in the states where they do business.
A lender who asks you to wire money or pay an individual. Do not make a payment for a loan or credit card directly to an individual. Legitimate lenders will never ask you to do that! Similarly, do not use a wire transfer service to send money orders for a loan. Legitimate lenders will not ask you to do this and you will have little recourse if there is a problem with a wire transactions.
In addition to the six red flags listed above, DFI advises consumers to take the following precautions:
- Make sure that the entity is licensed. Consumers can use the “Verify a License” feature on DFI’s website at https://dfi.wa.gov/ to check whether a payday or consumer loan company is licensed to conduct business in the state of Washington.
- Never provide any personal information, such as social security number or bank account number or access if the company is not licensed or authorized to conduct business.
- If the scammers already have your bank account information, social security number, or other personal information, you may be a victim of identity theft. You can contact your bank and the three major credit bureaus to take appropriate precautions. The FTC has information for victims of identity theft online at www.ftc.gov.
Washington State Department of Financial Institutions (DFI) issued an alert outlining an apparent “Advance Fee Loan Scam”. You can read the full report on the DFI's website.