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Warning issued over advanced fee loan scam

Posted by Mitch Lipka  September 26, 2011 08:00 AM

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The advance-fee loan scam can, to some, appear painfully obvious. But the number of complaints about “companies’’ ripping off consumers with this scam is on the rise as people desperate to borrow get drawn in by slick operators, according to the Better Business Bureau of Eastern Massachusetts, Maine, Rhode Island, and Vermont.

The local BBB is seeing the increase because of complaints and inquiries coming from around the country about offers supposedly from businesses in New England. BBB vice president Paula Fleming said it is important that consumers know that paying money upfront to borrow, particularly through wire services such as Western Union , is a surefire sign of a scam, because there is almost no hope of restitution.

Gaye Norris of Norfolk, Va., thought she was about to get a $5,000 personal loan from a Rhode Island finance company she found online. It asked for six months of payments upfront to be wired.

“I read the contract, asked questions, received what I thought were correct answers. We waited and prayed,’’ she said.

Norris said she was told if she sent the money - which was everything she could muster - on a Friday, the full loan amount would be deposited in her account by the following Tuesday. But the money didn’t come. After asking the loan officer, he said the lender required an additional upfront payment, which she refused to do and asked for a refund. After daily calls, it became clear she had been taken.

“I am now filing bankruptcy,’’ she said.

Olivia Simms, who lives in California, tells the same story.

“I guess this was too good to be true,’’ she said.

Because the money is wired, usually overseas, it is almost impossible to trace and is rarely recovered.

“Often, an advance-fee loan scam website will be created and taken down within a couple weeks only to be replaced by another operating under a different name and fake business address,’’ Fleming said.

Watch for the red flags. You should never make payments on a loan before you have received one and never pay by wiring. If you think you have been taken in by an advance-fee loan scam, contact the Federal Trade Commission and the state attorney general.

This blog is not written or edited by or the Boston Globe.
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About the author

Mitch Lipka is one of America's leading consumer journalists and advocates. He is an expert in product safety, recalls, scams, and helping consumers get out of jams. He is a nationally known consumer columnist and runs He lives in Worcester. You can find him on Facebook or reach him at


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