Jun 16, 2008 7:21 pm US/Eastern
Experts Warn Against Advance-Fee Loan Sharks
NEW YORK (CBS) ―
With soaring utility bills and high prices everywhere you turn, you might be tempted by new ads that guarantee loans regardless of your credit history. But as CBS 2's Consumer Reporter Kirstin Cole warns, there is a catch.
Cheri Lewis is doing her best to take care of her family, work full-time and stay on top of her bills. But Lewis says, right now, it's not easy.
"We've been behind on things. We were not able to get a loan through the bank because of credit reasons," said Cheri Lewis, a recent victim of an "advanced loan."
Then she found an offer online that promised her money despite her credit history. She contacted the company and was thrilled to find out she qualified.
"Pay off some past debt and then be able to fix up our house a little bit and have some good times with our kids this year," said Lewis.
But there was a catch. She had to send the lender some money first. She wired more than $1,000 to an account in Canada, but grew suspicious when the company called asking for more.
"So we decided that we didn't want to do it anymore and asked for our money back," said Lewis.
But the refund never came and the phone number the company provided her was suddenly disconnected. The Better Business Bureau says this type of advance-fee loan was a popular rip off years ago, and is now making a comeback.
"In 2007, we've seen a 73 percent increase over 2006. This is a direct result of the credit crunch," said Sheila Adkins of the BBB.
And there's a new and dangerous twist. Experts warn advance-fee loan sharks are now asking for lots of personal information up front.
"You don't want to give out your credit card information, your bank account information or social security number to anyone who is offering you a loan over the phone or internet. It can be used to create identity theft against you," said Adkins.
So, how do you know if you're applying for a legitimate loan or falling for a scam? CBS 2's Kirstin Cole says to do all the business over the phone.
The Federal Trade Commission says many of these bogus offers come from Canada and they're working closely with the Canadian government to try to stop them.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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