Loan Scams: What are They and How to Prepare

Imagine you are clicking through a loan offer email, feeling hopeful after being denied for a loan the previous day. Maybe your credit score needs work, so you weren’t surprised by the denial. But today, this email offers a guaranteed loan, regardless of credit history. All you have to do is pay a fee…

And so begins a typical loan scam.

What is a loan scam?

Scam lending, or Advance Fee Scams, are fraud techniques in which the scammer promises to pay out loan funds. As in the above case, to cover expenses for insurance, taxes, collateral, or to pay for these fees with gift cards.

Are you at risk for loan scams?

Everyone is at risk for loan scams. There are several other scams to be on the lookout for such as Lottery and Romance scams to name a few. The largest targets for loan scams are those already struggling with challenging financial circumstances, such as:

  • Poor credit history
  • Unemployment
  • High debt
  • Vulnerable adult/elderly

According to the Federal Trade Commission’s (FTC) Consumer Sentinel Network, more than 2.8 million people reported cases of fraud last year, with data showing that consumers reported losing $5.8 billion to fraud in 2021 alone. Reported losses have increased more than 70% since 2020, due in part to the COVID-19 pandemic, which created an environment where many people found themselves in desperate straits and easy targets for scammers to take advantage of.

How do I know if I’m being scammed for a loan?

Scammers often pose as legitimate, credible lenders, and we works hard to monitor third parties misusing our name. Our team members are trained in how to recognize and report fraud, so they can aid customers who have been victimized by a scammer who fraudulently poses as a legitimate business.

Watch out for these red flags when reviewing loan offers:

  • Guaranteeing approval and/or not checking your credit history.
  • Asking you to pay fees upfront before receiving loan funds, supposedly for insurance, taxes or collateral.
  • Instructing you to make your fee payments by asking you to purchase or place money on debit or gift cards (e.g. Google Play cards).
  • Instructing you to make your fee payments via peer-to-peer payments, such as PayPal, Venmo, Cash App, or through cryptocurrency.
  • Continuing to ask for fee payments until you either decline or run out of money; also, asking you to overdraw your checking account to pay the fees.
  • Advising they will put money in your Financial Institution’s Bank account to show good faith, for you to then return the payment to them.
  • Emailing you from a personal email account such as gmail.com instead of a corporate account. Look at the email address. If it ends in an account name that is not consistent with the official name of the organization, you should be skeptical.

The FTC offers these additional ways to tell if you’re being scammed:

  • The lender is not transparent about their fees when asked, or they change as the transaction progresses.
  • The lender asks for money or payments to be wired to an individual.
  • The lender uses a website that is not secure, has a domain name that doesn’t match the company’s name, or uses a “copycat” name.
  • The lender uses pressure tactics or becomes agitated by your reluctance to pay fees.

What should I do if I get scammed?

If you’ve been involved in or have been a victim of a loan scam, we recommend that you follow the steps below.

1. Report your situation immediately to the following agencies:

  • The Federal Trade Commission’s fraud report page or call 877-438-4338.
  • Your state’s Attorney General’s office.
  • The FBI’s Internet Crime Complaint Center if you’ve been targeted online.
  • The Better Business Bureau’s Scam Tracker.

2. Take these steps to protect your information and help prevent further financial loss:

  • Stop all contact with scammers. Do not speak to them anymore. Do not give them information, send money or gift cards.
  • If you have given the scammers your personal bank information (account, PIN, credit card numbers, etc.), please contact the issuing financial institution, tell them what happened and ask what you should do next.
  • If you gave sensitive personal information to the scammers (e.g., social security number, date of birth), consider contacting the credit reporting agencies to place an Extended Fraud Alert with your phone number and/or freeze your credit report.

Equifax – 800.525.6285 or www.equifax.com
Experian – 888.397.3742 or www.experian.com
TransUnion – 800.680.7289 or www.transunion.com

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