We hear this story every day at the BBB. Desperate people need loans to pay bills, keep their house out of foreclosure or some other urgent need.
If they have bad credit, they may get turned down for a loan from a bank, so they go online seeking a solution. Fast-talking scammers promise to get them money, but they ask for the victim to put up money in advance for "insurance," processing fees or some other bogus charge.
The victim, who may not be familiar with the loan process, sends the scammer a check, and they never hear from the scammer again - or if they do, the scammer wants more money.
A legitimate lender will not ask for money up front. Instead, the fees likely will be folded into the loan. And they will not ask you to send money by wire, such as by Western Union, MoneyGram or Green Dot MoneyPak.
Below is the information on a recent scam put together by our investigator, Bill Smith.
St. Louis, Mo., June 18, 2012 – Consumers nationwide continue to be victimized by sophisticated loan scams that demand up-front fees for personal loans that are never delivered, the Better Business Bureau (BBB) warns.
In the past six weeks, thieves using fabricated addresses in the St. Louis area have stolen tens of thousands of dollars from more than 40 unsuspecting borrowers, many of them desperate for money to help pay bills, buy medicines or forestall home foreclosures.
“They are evil, evil,” said a 66-year-old disabled widow from Claremore, Okla., who lost nearly $1,100 to loan scammers who used a false St. Louis address in the 2000 block of South Compton Ave.
“I can’t believe people would do this to other people,” said an instructor in the Granite City, Ill., school system who lost $950 to thieves using a fake office building address in Sunset Hills, Mo.
A family from La Vergne, Tenn., is being evicted from its rental home after losing $2,800 last month to a scammer claiming a St. Louis office.
Michelle Corey, BBB president and CEO, said the loan schemes victimize desperate people who go online searching for a loan.
“The people who do this are the worst kind of vultures,” Corey said. “These people are constantly on the lookout for families who are struggling financially. Once they find victims, they will do whatever they can to strip them of what little they have.”
In the recent rash of loan scams, thieves have used the names American Commercial Finance, First Star Eastern Lending and Financial Services Unlimited, Inc. Similar scams around the nation have used hundreds of company names to dupe consumers. American Commercial and First Star faked addresses in Missouri. Financial Services claimed an address in East St. Louis, Ill.
In virtually all cases, the consumer said he or she applied for a loan online and was contacted by phone or email by a person representing one of the phony St. Louis area loan companies.
In the vast majority of cases, the scammers demanded that consumers take out insurance coverage on the loans by loading cash onto Green Dot MoneyPak cards and then forward the thieves the access codes. Usually, the thieves initially demanded between $600 and $3,000 to secure the loan. After receiving the first payment, the scammers typically demanded additional payments until their victims ran out of money or caught onto the scam.
Such Green Dot transactions are extremely difficult to trace. Other phony loan companies have used Western Union or MoneyGram to obtain the payments.
The businesses make use of authentic-looking loan documents and elaborate, temporary websites to convince consumers of their legitimacy. It is illegal for any company making loans by phone to take up-front fees.
Historically, the phony loan businesses change the names of their businesses every two to three weeks in attempts to keep a step ahead of law enforcement officials, consumer groups like the BBB and consumers.
At any given time, dozens of advance fee loan scams may be operating across the country. In addition to the fake St. Louis area businesses, BBB reports show recent scams operating out of addresses in Fort Worth, Texas; Providence, R.I.; Lansing, Mich.; Denver, Colo.; Albany, N.Y., and several other locations.
Other victims of the phony St. Louis area loan scammers include:
- The manager of a fast-food restaurant in Sedalia, Mo., who paid thieves claiming to be affiliated with First Star Eastern Lending nearly $1,000 for insurance on a potential $5,000 loan. She said she lives “paycheck to paycheck” and now has to find a way to repay the $1,000 to her parents, who loaned her the insurance money.
- A former highway toll booth operator from Akron, Ohio, who lost almost $900 in a nearly identical scam. The woman said she is on disability and the loss has forced her to fall even farther behind in rent. “All I can do is pray for them,” she said of the thieves.
- A single mother from Parlin, N.J., who said she was in urgent need of a $5,000 loan to pay off bills and deal with some legal issues, but instead lost $1,000. “It’s hard to imagine there are people like that out there,” she said.
- A Vietnamese immigrant from Renton, Wash., who borrowed $5,000 from a friend to “insure” a $100,000 loan he needed to open a small business. He said he will have to take on another job to pay back the money.
- A farmer from Nazareth, Texas, who was negotiating with First Star for a $100,000 loan to build a house, but instead lost $3,000 to the crooks. He has contacted his local sheriff, the FBI and the Federal Trade Commission, but all have told him there is little they can do to recover his money.
The BBB offers the following advice when looking for a personal loan:
- Be wary of applying for online loans through unfamiliar businesses or websites. Many of these online application sites are run by scammers or by people who sell your information to scammers.
- Understand that any business operating by phone and charging insurance or other fees in advance of making a loan is operating illegally.
- Do not do business with anyone who cannot give you an address that you can confirm as legitimate.
- Read any contract carefully and make sure you understand all requirements before entering into any agreement.
- Official-looking loan documents and sophisticated looking websites are easy to copy or fake. Just because a business appears legitimate, doesn’t mean it is.
- Check for a BBB Business Review by going to www.bbb.org or call 314-645-3300.
The BBB is a nonprofit, business-supported organization that sets and upholds high standards for fair and honest business behavior. The BBB provides objective advice, free BBB Business Reviews on more than 4 million companies, 11,000 charity reviews, dispute resolution service, alerts and educational information on topics affecting marketplace trust. Please visit www.bbb.org for more information.