Advance Fee Loan Scams
Devastating to their victims, advance fee loan scams lure customers in search of short term credit with the "guarantee" of quick, easy cash. The only catch? Customers are asked to pay an application fee prior to receiving their loan.
The reality: No legitimate lender, online or otherwise, will guarantee credit, and no above-board company will charge an application fee as a condition of credit approval. Federal law requires fees and rates to be prominently displayed, but these scammers typically bury their fees behind pages of fine print, if they disclose them at all.
These scams are typically offered on the phone or via a website "pop-up." Learn more about advance fee loan scams here.
Phantom Debt Collection Scams/Payday Loan Debt Collection Scams
Hiding behind the veil of a "judge" or a "lawyer," phantom debt collectors seek to strong-arm their victims by collecting on debts. The big lie? These predators collect on debts that do not exist.
The scenario: You're sitting at home, enjoying a cup of coffee, when you get a telephone call from a "Mr. White" instructing you that you must pay him $500 IMMEDIATELY to settle your debt, or he will turn your case over to the state for criminal prosecution. He might even threaten that investigators or the police are on their way over to your house right now. He asks you to go to a local convenience store and purchase a prepaid gift card for $500, then takes your money and runs.
The reality? The Fair Debt Collection Practices Act expressly prohibits intimidation and threatening behavior when creditors collect on debts owed. Further, criminal prosecution of past due debts is generally not allowed and should be an indicator of potentially fraudulent behavior.
Consumers should think twice if asked to wire cash or provide a prepaid gift card as payment. Those payments are difficult to track and are commonly used by predators. Read more here.
Unauthorized Loan Scams
In an unauthorized loan scams, fraudulent actors posing as creditors attempt to fund a loan without the borrower's consent, or attempt to "cross-sell" customers in to expensive membership clubs as a condition of loan approval.
Although some of these predators may actually extend credit (or match consumers with a lender that extends credit) they will frequently attempt additional charges to the consumer's account for programs such as auto repair clubs, roadside assistance, credit repair, or extremely costly prepaid cards.
Consumers have the right to review loan documents and electronically authorize them (via e-signature) prior to funding, and buying in to a membership club should never be a condition of credit approval. Learn more here.
Military Financial Services Scams
Some unscrupulous financial services scammers specifically target military families and veterans. Servicemembers should be aware of common online lending scams and the resources available to them to avoid them. The Consumer Financial Protection Bureau's (CFPB) Office of Servicemember Affairs is a valuable resource for members of the military who feel they have fallen victim of a lending scam.