With Consumer Protection Week wrapping up today, we wanted to focus our third article in this series on how to protect yourself from financial scammers.  The fact of the matter is there are a lot of crocks out there looking to scam you out of something as sensitive and as serious as your finances.  We feel that the conclusion of consumer protection week is an especially appropriate time to advise you on how you can steer clear of Loan Scams and Fake Lenders.

How do Loan Scams Work?

The scam usually starts with a fake lender sending you an offer in the mail.  The scammers often reference a well-known name of a legitimate lender to reel people in.  After all, if they mention that they are affiliated with a company that you know is legit, they must be for real, right?  WRONG!  Here is how they manipulate victims day after day using their well thought out tactics:

1.      You respond to a letter or email you get that offers you a loan.

2.      Within the email or letter, you are asked to call a “third party consultant” that will get your application started.

3.      During this phone call, you are asked to give your personal information, such as your date of birth and social security number-then suddenly, after quickly assessing your information over the phone (or so you think), your loan is magically approved!

4.      The scammer will then either fax a bogus loan package to the person or will ask them to visit a website, where they will enter their bank account information.

5.      Lastly, the person is asked to wire an advanced payment to the scammer.

6.      Boom-the fake lender disappears into thin air, with all of the person’s personal information-and their advance payment.  They never receive a loan, and are left with nothing but an emptier bank account and a stolen identity.

Signs You are Working with a Fake Lender

There are certain things a legitimate lender will never do.  Below, we list things that should raise a huge red flag:

• They contact you – legitimate lenders will not be harassing you via email or via mail.
• They guarantee your loan will be approved, no matter what – this isn’t realistic! If you hear these words, run for the hills! No legitimate lender will ever make this guarantee up front. The background check legit lenders perform includes checking your credit and contacting your references. It is simply impossible to approve a loan over the phone that quickly!
• They ask for advance payment to an individual – legitimate lenders will not ask for an advance payment, especially not to an individual person.
• They direct you to a website to enter more personal information – these scammers often imitate legitimate loan websites, stealing logos and information. When the window appears, it actually takes you to Microsoft’s website. Be sure to type the correct url into the window yourself to see if the website is legit.

How to Protect Yourself from Loan Fraud

Now that you are aware of the red flags to watch out for when it comes to fake lenders and loan scams, it is important to be aware of the additional things you can do to protect yourself.

• Subscribe to an identity theft protection service: If you believe you may have mistakenly fallen for one of these scams, as many consumers do, it is crucial to subscribe to an identity theft prevention service. If you have handed over personal information, you can be sure these scammers are taking full advantage of possessing your personal information. These identity theft services will run a check to see where your personal information is being used, and will help resolve any issues they may find.
• Do your homework-comparison shop: If you need a loan, do your research. Look online to see what other consumers are saying about the legitimate lenders they have worked with. The time you take to investigate will help you learn about specific experiences other consumers have had with lenders. Talk to your friends, ask people at your work-get a referral from someone you trust. Don’t sell yourself short by responding to an email or letter from a potential fake lender-it will cost you in the end!

We have adopted a new strategy moving forward with this blog.  We want to tie in important happenings in our economy with the everyday life of all Americans.  To do this we will start with three weekly themes:

Monday’s Market Movers

This weekly theme will watch the global markets and discuss the significance they will play in our everyday lives.  Monday’s Market Movers will follow and examine how the markets will affect credit and lending on both the individual level as well as on the banking level.

Wednesday’s Washington Weekly

On Wednesdays we will examine important events from Capitol Hill and the White House to assess their direct impact on lending and credit.  We will look specifically at the enormous amounts of spending and how it will trickle down to the everyday lives of all Americans.

Friday’s Financial Fitness

On Fridays we will gear our theme towards helping readers better their financial and credit standing.  We will look at little things that can be done to better your credit score, save some additional cash, or help your borrower profile to get the loan you need.  The overall goal of Friday’s Financial Fitness is to get you into a healthier financial situation.

We will begin discussing these themes in the next week.  We will continue to grow and expand our themes based on the economic situation and the response from readers like you.

As mentioned in our previous post, this week, March 1-7, is National Consumer Protection Week.  We outlined the goals of this week, along with the tools the official website offers.  In this section, ComparedForMe.com details how you can apply the goals of National Consumer Protection Week to online shopping.

Online Shopping: A Sea of Possibilities

When it comes to online shopping, the possibilities are endless.  With the simple click of a mouse, you as a consumer are led to hundreds of web pages that feature the type of product or service you are looking to purchase.  Most of these sites claim to offer the most popular and highest quality version.  Given this overwhelming number of options, how do you make a decision about which product or service to buy?

The first bit of text listed within the Consumer Info section of The National Consumer Protection Week website says the following:

“Information can help people get the most for their money, whether they are trying to stretch their paychecks, find a quick fix for a spotty credit history, or tell the difference between a real deal and a potentially fraudulent product or service.”

The keyword: information.  Being an informed online shopper can help you spend your money more wisely.  With that said, let’s explore the ways you can gather specific product and service information.

Comparison Shopping

Comparison shopping is defined as the act of comparing prices of something in advance before shopping for the best bargain.  There are specific websites, such as ComparedForMe.com, that place products and services side-by-side.  They paint an unbiased picture of each product or service, giving the consumer the key information they need to make an informed decision.  This information includes prices as well as the scope of service that each company offers.  Of course you have the option of individually researching each product on your own when comparison shopping; however, this can be a very time-intensive process, especially if you are not familiar with the industry you are researching.

Consumer Reviews

Within a lot of these comparison shopping websites is a section where users like you can post product reviews.  Here on ComparedForMe.com, we encourage you to test out the many free trials you read about.  Documenting your positive and negative experiences with any products or services can help you decide which service you ultimately would like to subscribe to.  Furthermore, posting honest consumer reviews is the type of active participation that National Consumer Protection Week advocates.  The more dialogue consumers generate through open discussion about products and services, the better educated we all become about how to spend our hard-earned money.

In order to fix the financial mess we are in, we must look at how we as a nation got here.  The changes we must all make are deep.  We must examine the habits that we have exercised every day; maxing out credit cards, buying the expensive cars, spending more then we make, and living outside our means.  This behavior cannot continue, as we have recently learned that the markets and our economy cannot support or sustain this way of life.

This sad reality check has proven that we as a country are a true debtor nation.  From the government down to the individual, we have issues with borrowing way more then we ever should.  Since the government borrows excessively on a regular basis, why can’t we place the blame on them?  Well, that is one way to look at it; however, the financial responsibility of every individual is on the individual.  Accountability is key here.

So what do we need to do?  Well, borrowing money to buy something you truly cannot afford is no longer an option.  Never again will Americans who cannot afford a true mortgage get a loan.  This was ridiculous in the first place.  But like our President said, in those days, reform was not a priority.  Well, not reform is a priority.  Every time you are about to make a purchase and pull out your credit card and NOT your debit card, you need to truly ask yourself, “is this something I need?  Is the reason I am using the credit card because I cannot pay cash for the item?”  If this is the case, then you should reconsider.  Many Americans took into no fax payday loans and failed to pay them back.

As Americans, we have always enjoyed the spoils of the best and the nicest things.  We have to realize the days of enjoying these things without consequence are over. It is inevitable that living outside an individual’s or a country’s means will come back to bite you.  No one will continue to supply you with loans if you only take news loans to pay off the old ones.