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How Easy is it to Get Scammed by Online Loan Companies?

by Ryan Guina

Do you know how to avoid online loan scams?

The FTC is working hard to educate consumers about safe financial practices, and their latest initiative shows how many sites scam consumers who are trying to improve their credit scores. TO educate consumers, the FTC created a fake website, shown below:

Esteemed Lending Services - not a real company!

When you click on any link on the site, you will automatically be redirected to a new version of the site which shows you how you could have been scammed by one of these online loan companies. See the result, below.

Don't Get Scammed! Esteemed Lending Services is a fake site created by the FTC

Avoid online lending scams

Follow these tips and you will dramatically increase your odds of avoiding these scams!

  • Lenders are very interested in your credit score and credit history. Avoid lenders that claim “guaranteed” and “no hassle” loans.
  • Be aware of all fees. If the fees are clear, don’t sign anything! Be sure you know exactly how much you are required to pay. That means reading the fine print.
  • Examine licenses and registrations. Make sure your lender is allowed to practice in your state.
  • Up front fees. Lenders charge fees in the form of interest – not for approvals. Avoid all lenders that require you to wire money with your application.

You also want to avoid giving lenders your bank account information or permission to withhold payments from your paycheck – in many cases you’ll find an empty account or no paycheck.

Check out the fake FTC site for more information.

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Published or updated June 26, 2010.
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{ 10 comments… read them below or add one }

1 Tom @ Canadian Finance Blog

Thanks for the mention Ryan!

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2 Financial Bondage

Thanks for serving in the USAF.

My advice would be to go to a local bank to get a loan. Or credit union. Getting one online is just too risky in my view. Local is best. Then you reduce the risk of getting scammed.

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3 Ryan

A local lender is usually the best option, or a peer to peer lending company, such as Lending Club or Prosper. The problem though, is that most of these sites prey on individuals with poor credit by making promises of “guaranteed approval,” “instant approval,” etc. Education is the key.

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4 Craig

Very interesting and it is becoming more difficult to realize what is real and what is a scam. Something we need to read about more.

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5 Ryan

Agreed. It’s very easy to place a logo or badge on your site declaring your site is “secure” or part of a legitimate network. Always research the company before sending them money or personal information.

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6 FrugalTrader

Thanks for the mention Ryan!

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7 Kara Sharp

I am being harrassed at my job by a man that has a thick middle eastern accent. He called my job yesterday leaving a message to call a “Rose Taylor” and it was an emergency legal matter. The phone # is 646-926-7086. It is a New York area code. I did a reverse phone lookup and there is no name or buisness attached to it.

He claimes he is from a legal office and is collecting on a unpaid online loan. Supposedly I owe them 502.00. If I choose to take this to court he said it will cost me 2600.00 after legal fees are attached and he is going to contact my employer and I will be garnished.

I have in the past applied for an online loan before. I don’t recall ever receiving one.

I asked him to send me information concerning the matter by mail. He claims I have to agree to a payment and go to a Kinko’s or somewhere there is a fax machine and he will fax the information. I asked him to email the information and I would print it off, I have yet to see ANYTHING in my email. He knows my social security number, where I work, where I used to live, and my date of birth. He read all of them off to me. I have called the number and I received a message that the person at ext. XXXX is unavailable and to leave a message, but the mailbox is always full.

He has told me he will call my job and I will be embarrassed because I owe money and everyone will laugh at me. How can I find out if this is a scam or if someone took out a loan in my name online (my ex-husband has taken them out in his name) and I need to pay it to not ruin my credit and take whoever to court.

This man also claims there is no stores for this company and it is a strickley online buisness. Please advise.

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8 Ryan

Kara, by law he is required to provide proof that you owe the loan. You should familiarize yourself with this page from the FTC: Debt Collection FAQs: A Guide for Consumers. Should the debt collector fail to provide you with evidence of your debt and continue to harass you, you should report this to the FTC. The law also gives you rights that would allow you to sue the debt collector for harassment, should he be in violation of Fair Debt Collection Practices Act.

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9 Ron

I hate scammers.
I always try and put the pressure on the person calling for the money.
Ask questions like, name, phone number, address, name of lawyer, can you fax me the papers, who do you work for, give me your number so that I can call you right back.
Scammers never give all the information.

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10 Donald Petersen

@ Kara – Scammers obtain their information through a wide variety of ways. Ryan described many of the most common ways but the possibilities seem almost endless. Data breaches at banks, mortgage servicers, on-line service providers (e.g., Sony PlayStation), and payday loan companies happen “all the time”.

@ Ryan – The Fair Debt Collection Practices Act would apply but the problem is that it is often impossible to ever locate a true “scammer” (as distinguished from a typical collection agency that violates the FDCPA). Even if the consumer’s lawyer ever served the scammer and obtained a judgment, the likelihood of collecting any judgment is probably remote.

An increasing number of consumers who call me are describing an increasing number of very severe collection harassment by callers who have foreign accents.

Consumers who receive harassing telephone calls on accounts that are not their account, should consult with an experienced consumer lawyer.

Suing the collection agency is often the only way to end the harassment and prevent the debt collector from assigning the account to another collector. If the debt collector is a true “scammer”, reporting the collection agency to the government’s inter-agency task force is probably the best hope of ending the harassment.

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