The Pinellas County Justice & Consumer Services and the Federal Deposit Insurance Corporation (FDIC) are warning consumers about the pitfalls of advance fee loans. Many of these loan offers are advertised to consumers through unsolicited e-mails (spam), offering mortgage refinancing, debt consolidation and elimination, grant opportunities and small business loans. While some of these e-mails may advertise legitimate loan programs and lenders, advance fee loan scams are becoming more prevalent.
Advance fee loan scams often prey on consumers who may be under financial duress and seeking quick, easy loan approval and funding. The scam typically involves a lender making false promises to arrange for a loan in return for fees paid upfront by the loan applicant. Scam artists may even design websites and online loan applications with the appearance that the company is legitimate. Potential borrowers may be asked to provide information through a website or may be contacted by phone or e-mail by a "representative" who guarantees loan approval as soon as the borrower pays the fee. The loan applicant may be told that the fees will be used to pay a third-party’s loan insurance or application processing, or to make the first month's loan payment. The loan applicant may also be told to send or wire transfer money to an individual overseas before receiving the loan proceeds.
In some cases, the loan applicant has been falsely directed to a legitimate financial institution that has no knowledge of the transaction. In other cases, the loan applicant is told that the loan request was declined and is asked to forward additional money to qualify for a different loan program. Unfortunately, after complying with all instructions, some consumers never hear from the company again after the money has been sent. To avoid becoming a victim of an advance fee loan scam, consumers should be cautious about responding to unsolicited offers that require payment in advance for services.
In Florida, loan brokers and businesses soliciting mortgage foreclosure assistance are prohibited from charging advance fees. The law exempts financial institutions, attorneys and licensed lenders from this requirement.