Advance Fee Loan Scams Busted

Over the years, we’ve received numerous complaints from consumers who have been ripped off in advance-fee loan scams. We’ve been naming names in an effort to get the word out and prevent this kind of financial heartbreak from happening to others.

It’s hard to nail these crooks because they just close up shop, move somewhere else, change their names, and start all over again. So finally the Federal Trade Commission has stepped in and going after their tool of the trade: money wiring services.

(If you are not familiar with this crime, read this post we wrote three years ago about how advance fee loan scams work. Basically, these firms tell desperate consumers that they can get a loan as long as they make several “payments” upfront, or perhaps buy “credit insurance to protect the lender.” The applicant wires the money to the company and of course never gets a loan.)

The FTC has just announced that MoneyGram will pay $18 million to settle FTC charges that it allowed its money transfer system to be used for fraud. And MoneyGram will have to put systems in place to prevent this type of fraud in the future. The FTC charges that the company let its money transfer system to be used by fraudulent telemarketers to bilk consumers out of tens of millions of dollars. (Advance fee loans were just one of the fraudulent programs involved. Others were told they had won a lottery or were hired for a secret shopper program. While $18 million sounds like a lot, consumers lost a whole lot more to these schemes – a minimum of $84 million.

That’s one small victory for consumers, but keep in mind that these crooks are creative, and they’re cooking up new schemes even as I write. If you are concerned about a fraudulent loan offer, be sure to share your loan scam story on our forums.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.

Comments

[Jeanne Oestereich]

Thank you for helping to get out this type of information. It is horrible the way businesses are sometimes taking advantage of people who are desparate for help.

[Melanie]

I noticed that the FTC made MONEY GRAM pay back some of the money scammed through them HOW CAN I contact the FTC to see if they will impose the same restrictions on Western Union?
If Western Union has been notified (and I don't see how that's possible considering IT IS ALL teleprompted and I am not even sure a live person works there because you sure can't reach one and I HAVE desperately tried) Why are they NOT forced by the FTC to follow the same restrictions and rules of Money Gram and why do their representatives NOT warn you when you go to their stations that you may be being defrauded I would think this general act of kindness is also an act of consciousness.

[Gerri]

Melanie - You raise a really good question. The FTC often takes enforcement action after it notices a pattern of abuse. So be sure to file a complaint against Western Union and the company that scammed you at FTC.gov.

We'd also appreciate it if you tell us the details of the advance fee loan company that scammed you on our forums. The thread is here:
http://www.credit.com/forum/posts/list/83.page

You are welcome to name names. Maybe it will help others avoid the same fraud.

[Joe Sellers]

Hello Gerri, My name is Joe Sellers. You make a lot of very good points. I recently wrote a letter to the credit card companies and I would like you to take a look at it and let me know what you think. I will also keep an eye out for your future articles. Keep up the good work and have a great New Year. The web address is http://www.dealingwithyourdebt.com/