Beware of Advanced Fee Loan Scams

One   favorite scam is the so-called "advance-fee" loan. That's when you are guaranteed to get a loan or other type of credit, but you must pay before you apply.

Ads that promise loans appear for the most part in the classified section of local and national newspapers and magazines, and o­n the Internet. They also may appear in radio advertisements, o­n local cable stations, and in flyers circulated in neighborhoods, shopping centers and at military bases. These ads often have "900" numbers, which result in charges o­n your phone bill (a definite eye-raiser), or toll-free "800" numbers. Unfortunately, advertising in recognized media outlets or o­n the Internet does not guarantee the legitimacy of the company behind the ad. And, sadly, they often target people already in debt. In addition, these companies often use delivery systems other than the U.S. Postal Service, such as overnight or courier services, to avoid detection and prosecution by postal authorities.

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. And o­nce con artists get your money, they disappear with your money.

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.

According to the Telemarketing Sales Rule, if someone guarantees or suggests that there is no problem for them to get or arrange a loan or other form of credit for you, it's against the law to ask you to pay, or accept payment, for their service until you get your loan or credit.

Here are some “red flags” to notice if considering an advance fee loan:

A Guarantee. Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

Pay for Processing. If you apply for a real estate loan, it is accepted and common practice for lenders to request payment for a credit report or appraisal. However, legitimate lenders never ask you to pay for processing your application.

Account Numbers. Never give your credit card account number, bank account information, or Social Security Number over the telephone or Internet unless you are familiar with the company and know why the information is necessary.

No Offer in Writing. If you don't have the offer in hand or confirmed in writing and you are asked to pay, don't do it. It's fraud and it's against the law.

If you think you've been a victim of an advance-fee loan scam, contact your local consumer protection agency, state Attorney General or local Better Business Bureau (BBB) to report the company.

It's a good idea to try to solve your debt problems with your creditors as soon as you realize you won't be able to make your payments. If you can't resolve your credit problems yourself or need additional help, you may want to contact a credit counseling service. There are nonprofit organizations in every state that counsel and educate individuals and families o­n debt problems, budgeting and using credit wisely. These organizations work directly with your creditors to help resolve your debt problems by negotiating a repayment schedule that is affordable for you and acceptable to the creditor. There is little or no cost for these services.