A New Scam Has Come Out: Advance Fee Loans

It seems that the woes of American consumers are never going to end. The economy continues to be stale, though there are signs of recovery. Unemployment is rising steadily. Credit has become very expensive with credit card interest rates and fees at record highs, new fees being added and available credit getting cut down. To top it all off, new scams are coming out targeting weakened consumers almost every other day.

Now, a new scam is making the rounds among consumers, specifically targeting those with not so healthy credit history. The scam offers loans or credit cards to consumers and promises to ignore whatever credit history the consumer has. For cash strapped consumers who got hit hard with the economic downturn, unemployment and the credit card crisis, it would sound like a dream come true.

The scam works by tempting consumers with ads and online sites that offer loans or credit card to consumers. It seems simple enough. However, the bait is that these offers promise that they will not take a consumer’s credit history into account for approving the loan or credit card application. Basically, loans and credit card applications would be granted regardless of the credit history of the applicant. Considering the number of American consumers right now whose credit history got mangled when the economic crisis hit and it is fairly obvious that this particular scam is fishing in a full pond.

The catch of the scam is that, before the loan or credit card application is approved, the applicant has to pay a certain fee in advance. A warning from the Federal Trade Commission specifically warns consumers that such tactics, demanding advance fees for loan or credit card application approval, is a scam. It is not legitimate business and consumers who pursue such offers would only be enriching the con artist while depriving themselves of much needed money. With this scam, the victim ultimately ends up with a useless application or an unwanted debit or stored-value card.

While the money that a victim loses is definitely a serious concern, the personal information that the scammer collects is even more serious. Cases of identity theft are already very common. Victims of this scam could well belong to the pool of identity theft victims as well.

According to the FTC, consumers can best defend themselves by recognizing the red flags of the deal. Loan and credit card pitches that show no interest in a consumer’s credit history is definitely suspect. Asking for undisclosed advance fees is another suspicious practice. Even more suspicious is when they insist to conduct business over the phone or through the internet only and use business names that copy established and trusted companies or organizations.