Mar 7, 2009
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!
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- Identity Theft Protection and Prevention
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