Canadians lose $1 million to advance fee loan fraud per year

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Net Patrol International Inc.  Data Investigation and Forensic Services
Bankruptcy and Insolvency Trustees

Financial trouble happens to all of us and comes with a lot of worries. But be careful if you decide to get help by taking out a loan. In 2015 approximately $1 million dollars was lost in Canada to advance fee loan fraud (read more), a scam where the customer is asked to pay an advance fee to get a loan. This is illegal in the United States and Canada so you should never accept to paying a fee.

What is advance fee loan fraud?

What is advance fee loan fraud? The victim applies for a loan online or via telephone and is encouraged to send funds for insurance and to prove ‘credit worthiness’. After the funds are transferred, the loan that was promised is never provided.

The BBB Explains: “Advance fee schemes often target individuals who are having difficulty obtaining cash or credit. Individuals are lured by advertisements promising ‘guaranteed’ loans – regardless of credit history.” The fees range anywhere from $50 to $2,000. It is important to keep in mind that in Ontario and the rest of Canada, it is illegal for a company to request an upfront fee, prior to obtaining a loan.

Reported fraud cases

For example the company Second Solution Credit, that fortunately does not exist anymore (read more). Janet was promised a loan of $35,000 and wired the first and last payments to release the loan. Not much time later the company disappeared and all her money was lost: “I felt it to be shady but there were no reports of it being a scam and I was foolishly optimistic. I am embarrassed that I did not know better.”

In another case the former company Berkshire Lending Group Limited scammed someone out of $1,500 by asking a fee. The victim received a phone call from a woman called Angela offering a loan. She later sent a contract letter that looked formal and trustworthy. The victim signed it and paid six months in advance to secure the loan in case she defaulted on a payment at any time: “So as a dummy I sent it in two increments. The last I heard from them was that my loan of $10,000 would be released on Wednesday the 5th in August. No money was ever released and the phone number was disconnected.” The victim even had to change all her financial information as the scammers knew everything about her.

How to prevent fee loan fraud?

BBB notes the following red flags at loan companies to watch out for:

  1. No interest in credit history
  2. Fees that are not disclosed clearly or prominently
  3. When asked to wire money or pay an individual
  4. Requests for personal information, not related to a credit check
  5. A loan offered by phone
  6. The use of generic or “copy-cat” business names
  7. Companies that are not registered in your province

Canadian Fraud News