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Advance fee loans are usually, if not always, empty promises of a personal or business loan requiring payment of a fee in advance. Fraudulent advance fee loan schemes generally prey on vulnerable consumers — the unemployed, those who have bad credit ratings, or those in immediate need of money for emergencies.

Ads promising "money to loan . . . regardless of credit history" lure consumers into paying fees that range from $25 to several hundred dollars, in advance of supposedly receiving loans that are "guaranteed." Often, these ads feature "900" numbers, which result in charges on your phone bill, or toll-free out-of-state or country "800" numbers.

The fee may be called "processing", "application" or "first months payment". While legitimate lenders may require you to pay application, appraisal, or credit report fees, these fees are never required before the lender is identified and the application is completed. In addition, the fees are generally made payable to the lender, not the broker or arranger of the supposed "guaranteed" loan or extension of credit.

In most instances, you never receive the promised loan and either never hear from the loan company again or are later told by "turn down room" — a third-party that denies applications for loans and other credit — that you are ineligible for the credit.

Small businesses have been charged as much as several thousand dollars as an advance fee for a larger loan. Whether you are an individual or the owner of a small business, the result is the same: you don't get your money; the con artist does.

In the U.S. it's against the law to ask for money up front to help obtain a loan. The money must be in your hands for seven days before payment can be requested. This is the same for either a direct loan or through a third party.

Get loan offers in writing, shop around, then compare promises to the written agreement. There is free or low cost help with your credit

Larger Business Loan Frauds

It is, however, not always the underprivileged that are targeted. Recent cases have shown where businessmen seeking multi-million dollar loans for ventures, which have been rejected by more conventional lenders, have lost hundreds of thousands of dollars each ( $250-750k ) in advance fee losses.

Drawn in by the impressive executive offices and apparently affluent connections of high flying brokers, these entrepreneurs, upon paying, were soon faced with delays, evasions and excuses. This ultimately led to the disappearance of the perpetrators along with the funds collected. Occasionally a ponzi structure needs to be established to work this scam, but fabricated word-of-mouth success stories will usually do the trick.

The Money Is On The Way

Desperately in need of cash you respond to one of several ads you've seen in the classified advertising sections of tabloids such as Star, Enquirer and Globe magazines and local newspapers.

Fast Cash. Easy qualifying loans from $1, 000-$25, 000.
Bad credit / no credit OK.
Call (800) 771-9322

Thousands of callers nationwide who responded to the ad's 1-800 number were asked for personal and financial information, told they could borrow up to 20% of their incomes and were instructed to call back in 45 minutes to see if they had qualified for a loan.

After calling you end up talking to a loan dealer who asks for more of your credit history information over the phone, then tells you that your loan application has been "approved", that you have "qualified" for the loan, or that your bad credit is not a problem and that there is a high likelihood that the lenders will be successful in obtaining a loan for you.

He requires you to submit certain identification and credit-related information in writing, along with an advance "processing" fee of $199, paid by money order or cashier's check, delivered to the loan dealer's address by an overnight courier service.

Once the money is received, he tells you that your file has been forwarded to the actual lending organization. They subsequently notify you by mail that your loan application has been officially referred on and thank you for your business.

They provide the "lender" with your name and address, along with payment for the "turndown" service. The supposed lender in turn requests from you another $15 to obtain your credit report plus another "processing" fee of $89. Subsequently, upon payment of these fees, they send you a notice stating that an unidentified "private lender" has denied your loan request.

The "lenders" were actually "rejection mills" or independent fraudulent entities that, for a set fee paid by the fraudulent telemarketers, pretend to be lenders by sending forms and letters to loan applicants.

Unaware of this, you advise them about the loan dealers' practice of guaranteeing loans and requiring an up-front fee, yet they continue to decline your application which they never had any intention of fulfilling. None of the more than 5, 000 loan applicants who sent advance fees received the loans.

Offering personal loans of up to $10, 000 to persons with prior credit problems, one telemarketing scheme defrauded more than 5, 000 victims and netted more than $1.1 million in just nine months.

Indicative of their target market, one disabled senior used her Social Security disability income, one woman used her child support money and one man pawned his television to pay the advance fee.

Some operations may initially send a fax implying approval so you send the requested advance fee. This is later claimed to be a membership fee for a debt consolidation advice service. Then you are either ignored or hit with further barriers or payment requests prior to the non-existent loan "approval".

"I mentioned to my people the discussion we had and they need another $500."

"If I could just borrow $300 for a few days, I'm sure I could convince my superior to get you approved."

Promises invariably degenerate into lame excuses such as boiler room callers crying over the phone "I'm sorry, I lost your money".

For desperate, vulnerable people already in a state of torment such as needing "last resort" money to save the family farm, to pay for a loved ones funeral, or to cover needed medical treatment for a sick child, they offer to expedite the non-existent funds for an additional $200.

In Canada this crime is perceived as a consumer dispute issue so the criminals usually get probation or an average of 60 days in jail, if caught and convicted...

During the telephone call, they take an "application" consisting of personal information about you such as your Social Security number, income, employment and debt, and then provide a document to you with the total amount of the debt consolidation for which you are approved and the terms for repaying the loan, including the amount of the payments and the number of payments.

Interesting facts

  • ACE Limited is the parent company of the ACE Group, a global provider of insurance products covering property and casualty, accident and health, reinsurance, travel, creditor, and life insurance. It also operates in the Lloyd's insurance market in London. It offers services including process management, unusual hazards identification and...

Additional information

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