Prepay Online Lenders Prey On Those With Bad Credit

By G. Patrick Kelley

October 19, 2007 4 min read


Prepay online lenders prey on those with bad credit

G. Patrick Kelley

Copley News Service

Fraudulent Web sites that look like legitimate lenders are becoming common on the Internet, according to The Better Business Bureau.

The Web sites in question promise loans to anyone, regardless of the person's previous credit history.

"That should be a red flag, right there," said Victor Russell, Canton, Cleveland and Akron area manager for Consumer Credit Counseling Service.

Victims across the U.S. and Canada report losing money, sometimes more than $1,000.

"People with the poorest finances are being victimized. Many mistakenly believe they have no other option," said Steve Cole, president and CEO of the Council of Better Business Bureaus.

Victims used Internet searches and ended up with lenders that guaranteed low-interest-rate loans for people with bad credit histories. After submitting the online loan application, they were contacted by a company "representative" who said they were approved.

Before they can receive their loan funds, however, they must first prepay a fee. Advance fee loan scams are illegal in the U.S. and Canada.

The loan applicant is told to wire the money or send a money order, usually to a location in Canada. The consumer never receives the loan and cannot recover their money.

"These bogus lenders are clever. They use a variety of tools to imply legitimacy," Cole warned.

Russell said legitimate lenders use credit scores to determine if you'll get the loan and the terms, and no quick bit of information is good enough for a reputable firm.

Victims also risk having their identity stolen if they provide their Social Security number or bank account number.

"Somebody is just looking to get that information from you," Russell said.

"We have seen a steady increase in the last three years, but it's mostly with out-of-state mortgage lenders" who engage in predatory lending, he said. Those lenders get their victims into very expensive loans that often cause them to lose their home.

"If you have trouble qualifying for a loan, you do have options," Cole said. "There are nonprofit organizations in every state with trained credit counselors who can assist individuals with debt problems."

To check on the reputation of a business, contact your local Better Business Bureau or visit


- Don't use Internet search terms like "bad credit loans" or "guaranteed loans" that may lead you to fraudulent sites.

- Don't wire money or send a money order to secure a personal loan. Legitimate offers don't require an up-front payment for any purpose.

- Don't do business with lenders that "guarantee" a loan before you apply.

- Don't do business with Web sites that refuse to provide a street address and a working telephone number.

- Use the Better Business Bureau to check if a Web site can be trusted.

- If the site has a BBBOnLine seal, click on it to check the Bureau's report.

- If you are victimized by an advance fee lender, file a complaint with the Bureau. While the chance of recovering the payment fee is minimal, your experience will help BBBs warn other consumers and assist government investigations.

SOURCE: Better Business Bureau

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