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Beware of advertisements for "advance-fee" or "guaranteed" consumer and small business loans. They are against the law. This site tells you how to recognize ads for advance-fee loan scams, how to tell them from legitimate offers by credit grantors, what to do if you are a victim, and where you can find low-cost help in dealing with credit problems.
The vast majority of legitimate lenders are owned and managed by professionals. But fraudulent loan brokers and other individuals misrepresenting the availability of credit and credit terms definitely are in business. One of their favorite strategies is the "advance-fee" loan scam. That's where you are guaranteed to get a loan or other type of credit — but you must pay before you apply.
Advertisements that promise loans generally appear in the classified section of local and national newspapers and magazines. They also may appear in mailings, radio spots, and on local cable stations. Often, these ads feature "900" numbers, which result in charges on your phone bill, or toll-free "800" numbers. Unfortunately, advertising in recognized media outlets does not guarantee the legitimacy of the company behind the ad. 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. Indeed, small businesses have been charged as much as several thousand dollars as an advance fee for a loan. Whether you are an individual consumer or an owner of a small business, the result is the same: you don't get your money; the con artist does. And once con artists get your money, they disappear.
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.
If someone guarantees — or states — there's a strong chance they can arrange to get you a loan or other form of credit, be suspicious. And if you're asked to pay before you receive the loan or credit offer, hang up. It's against the law.
According to the Federal Trade Commission's (FTC) Telemarketing Sales Rule, if someone guarantees or suggests that there is a strong chance they can get or arrange for a loan or other form of credit for you, they cannot ask you to pay — or accept payment — for their service until you get your loan or credit.
Here are some points to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:
If you think you've been a victim of an advance-fee loan scam, contact your local consumer protection agency, Better Business Bureau (BBB), state Attorney General, or Call for Action (202-537-0585; TDD: 202-537-1551) to report the company.
You also may file a complaint with the FTC. Write to: Correspondence Branch, Federal Trade Commission, Washington, DC 20580 or through the Internet, using the online complaint form. Although the FTC generally does not intervene in individual disputes, the information you provide may help indicate a pattern of possible law violations requiring action by the Commission.
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 assistance, you may want to contact a credit counseling service. There are nonprofit organizations in every state that counsel indebted consumers. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also will help you set up a realistic budget. These services are offered at little or no cost.
Check the White Pages of your telephone directory to get the number of the consumer credit counselor office nearest you or call 1-800-388-2227 using a touch-tone phone. If you have other questions, write of call: National Foundation for Consumer Credit, 8611 Second Avenue, Suite 100, Silver Spring, MD 20910, (301) 589-5001
Universities, military bases, credit unions, and housing authorities also may offer low- or no-cost credit counseling programs. Check the white pages of your telephone directory for a service near you.
The Federal Trade Commission (FTC) is making it easier and cheaper for consumers to report a fraud to the law enforcement agency through a toll-free Consumer Help Line, 1-877-FTC-HELP (1-877-382-4357). The line is staffed by counselors from 9 a.m. to 8 p.m., Eastern Time, Monday through Friday. Through the toll-free Help Line, consumers can get helpful information on the spot. The FTC can't intervene in individual disputes, but consumer complaint information is crucial to the enforcement of consumer protection laws. The FTC web site is http://www.ftc.gov/or you can write to FTC, Consumer Response Center, Washington DC 20580-0001.
The FTC publishes free brochures on many consumer issues. For a complete list of publications, write for Best Sellers, Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, D.C. 20580; or call (202) FTC-HELP (382-4357), TDD (202) 326-2502.