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The Grapevine

Advance-Fee Loan Fraud and Other Scams to Avoid in 2020


This blog is courtesy of Lending Club

There’s a new scam born every minute. Here we help you learn how to watch out for advance-fee loan fraud and other common scams that have the potential to ruin your finances, your credit, and your life.

What are Advance-Fee Loan Scams?

In advance-fee loan scams, a company contacts you saying they’re “ready to offer you a loan, today.” They might pretend to represent a reputable bank or non-profit, or use a company name you haven’t heard. They say you need to pay fees to get the loan and ask you to purchase a prepaid card, like an Apple gift card, Google Play gift card, Green Dot® prepaid card, or Vanilla Visa®.

If you say you can’t pay the fees, they will offer to add them to your loan amount, and then proceed to create a fake ACH deposit to your bank for the total amount. When you see the pending transaction (which makes the scam seem legitimate), you feel more confident about buying the card and giving them the number. No surprise, they drain the prepaid card, and the pending ACH deposit never clears the bank.

Red flags of an advance-fee loan scam

Some include:

  • Asking for money up front - Ignore any ad, email, or hang up on cold callers guaranteeing loans in exchange for fees paid in advance.
  • No credit check - No reputable lender makes loans without reviewing the borrower’s credit report first. A company that doesn’t check has no intention of actually lending you money.
  • The offer is too good to be true - Advance-fee scammers often approach people who have been turned down for other loans. Be wary of high loan amounts offered at super low rates—especially if you’re still building good credit.
  • You’re pressured to make a decision immediately, or to keep the offer secret - Take time to think about whether an offer makes sense. Research the company online, and talk with a professional (banker, CPA, attorney, financial planner) or someone else you trust first.

Romance Scams

According to a study by university researchers, nearly 40 percent of couples are meeting online. It should come as no surprise that scammers will try to trick vulnerable people looking for love into sending money. Here are a few quick tips for avoiding romance scams.

Online romance scammers have lots of excuses for not meeting you in person; they just “need” your money.

Red flags of a romance scam

Some include:

  • They’re out of the country - They say they can’t meet you in person because they say they’re out of the country temporarily, e.g., in the military, on an oil rig, or working with Doctors Without Borders.
  • There’s an emergency - They have an expensive emergency they need your immediate help with, such as surgery, debts to pay, or legal trouble.
  • Need your help to meet in person - They may say they want to meet you (finally). But guess what? Before that can happen they need your help paying some of their travel expenses, such as airline or customs fees.

Fake Check Scams

In this scam, you’re contacted by a random person (or company) and asked to cash a check, cashier’s check, or money order, and give them the money in order to receive some benefit. Usually, the check bounces because it’s a fake. But you won’t receive notification of this for a few days. In the end, you’re out any money you sent, plus bank penalties.

Variations on this scam include:

  • Giving you a fake check to cash in exchange for a small fee or a portion of the money.
  • Claiming to offer you a job, then sending you a counterfeit check to buy “office supplies” from a specific vendor.
  • Sending you a fake cashier’s check as an advance against alleged foreign lottery winnings, and asking you to immediately wire money for taxes or other fees.
  • Pretending to want to buy something you’re selling online. The scammer may “accidentally” send a check for more than the cost of the item then ask you to send them the difference between the cost of your item and what they sent (either by wire transfer or by purchasing a prepaid card). After you send the money, the original check bounces.

Red flags of a fake check scam

Some include:

  • If you didn’t play a lottery, you didn’t win - Foreign lotteries do not seek out “winners.”
  • Shady “employers” - Employers offering work-from-home arrangements will usually supply all your work equipment, or let you buy what you want and reimburse you afterward.
  • You’re asked to send money or information to a third-party - Bringing multiple people or companies into a single transaction complicates things and makes the scam hard to trace.

Debt Settlement Scams

Debt settlement, or debt relief, companies promise they can get your debts cancelled or reduced to “pennies on the dollar.” Their business is to negotiate with your creditors and get them to change their contracts with you. Though some debt settlement companies are legitimate, there are better alternatives, such as debt management plans, or consolidating debt if you can with a lower-interest personal loan. Unfortunately, fraudulent debt settlement companies take your money and fail to negotiate anything for you.

Red flags of a debt settlement scam

Some include:

  • Asking for payment or money upfront, before they do anything for you - A legitimate debt relief company won’t make you pay upfront.
  • “Guarantees” your debts will be forgiven - Getting settlements from creditors is a negotiation. No one can guarantee that the negotiation will succeed.
  • Advising you to stop making payments (and pay them instead) - If you believe this and stop making payments, your credit score will drop even further and you’ll lose negotiating power with your lenders.

Phishing Scams

Phishing is an email tactic used to gain access to a target’s computer. The scammer sends an email tailored to look like it’s from a legitimate source, or from someone you know. You’re tricked into providing personal financial information, such as your social security number, credit card number, or account passwords.

Red flags of a phishing scam

Some include:

  • Email attachments - Most people automatically open attachments, but almost any type of file can be used to deliver malware and other malicious payloads. Be very cautious about any attachments you’re not expecting.
  • Grammar and structure - Often the email will sound strange and contain misspellings, missing tenses, transposed words, and over generalities.
  • Email address - Often phishing emails know you’re more likely to open and and trust the content if it looks like it was sent by someone you know. They do this by slightly adjusting the domain name of the sender’s email address, e.g., comes through as

Government Imposter Scams

Government imposters will typically contact you over the phone or email, claiming to represent a federal, state, or local government agency. They may threaten the IRS will freeze your bank accounts unless you send money immediately. Then they’ll pressure you to pay them with a credit card. Or they’ll suggest you withdraw money from the bank, purchase a prepaid card, and give them the numbers.Other examples include:

  • The caller impersonates a law enforcement officer, and claims to have a warrant for your arrest.
  • A caller asks for your Medicare number to schedule you for a medical screening.
  • Citizens in certain states have received an emailtelling them they have unclaimed property with the state.

Red flags of a government imposter scam

Some include:

Be suspicious of any contact from the government by phone or email
Government agencies usually mail letters on official stationery. If you haven’t recently made contact with that agency yourself, it’s probably a scam.

Be very suspicious of anyone claiming to represent law enforcement
If the police want to arrest you, they will not call to ask you for money first.

Protect Yourself from Scams

Knowing how to spot common scams like these can help you prevent identity theft and protect your private personal and financial information. If you suspect or fall victim to a scam, the Consumer Financial Protection Bureau recommends several important steps you should take right away, including filing a complaint with the Federal Trade Commission.

Losing money or property to scams and fraud can be devastating. Learn more about how to recognize, prevent, and protect yourself and others from fraud and common types of scams.

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