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Beware of advertisements for "advance-fee" or "guaranteed" consumer and small-business loans. This brochure tells how to recognize ads for advance-fee loan scams and how to distinguish them from offers by legitimate credit grantors. It also tells you how to protect yourself, what to do if you are a victim, and where you can find low- cost help in dealing with credit problems.

How to Recognize an "Advance-Fee" Loan Scam

Advertisements that promise loans generally appear in the classified section of local and national newspapers, magazines, and tabloids. They also may appear in mailings, radio spots and on local cable channels. Often "900" numbers that result in charges on your phone bill, or toll-free "800" numbers, are featured in the ads. However, simply advertising through recognized media outlets does not ensure the legitimacy of the company behind an ad. In addition, such companies often use delivery systems other than the U.S. Postal Service, such as overnight or courier services, to avoid detection and prosecution by postal authorities.

Some companies claim they can guarantee you a loan for a fee paid in advance. The fee may range from $100 to several hundred dollars. Small businesses have been charged as much as several thousand dollars as an advance fee for a loan. But whether you are an individual consumer or a small business owner, the result is the same: once the con artists have your money, they disappear and you never get your loan.

Do not confuse advance-fee loan schemes with legitimate offers of credit from mortgage brokers, banks, savings and loans, and credit unions. Legitimate credit grantors may charge fees to process your loan application, but they will not guarantee that you will qualify for a loan. Illicit advance-fee loan schemes, on the other hand, either promise or strongly suggest that a loan will be provided in exchange for an up-front fee. Salespeople for such companies also may verbally promise that some or all of your advance fee will be refunded if your application is unsuccessful. Some fraudulent companies also may claim that your advance fee will be credited toward repayment of the loan. Usually none of these claims is true.

How to Protect Yourself

The FTC suggests the following precautions before you respond to ads for advance-fee loans.

* Be wary of advertising that claims that bad credit is no problem in getting you a loan. If money is not available to you through traditional lending institutions, it is unlikely to become available in response to a classified ad.

* Be cautious of lenders who use "800" and "900" numbers. You may call an "800" number which then directs you to dial a "900" number. You pay for "900" number calls, of course, and the charges may be high.

* Check out the company. Contact your local consumer protection agency and the state Attorney General's Office to learn if they have received any complaints about companies offering advance-fee loans. Keep in mind, however, that suspect companies often establish their operations in one state, advertise heavily for only a few months, collect their loan fees, only to close up shop and move on to another state before complaints are registered and local authorities have a chance to act. Therefore, just because your local consumer protection agency has no complaints on file does not mean that an advance-fee loan business is legitimate.

* Be careful about making any loan agreements over the telephone.

* Do not give your credit card, checking account, or Social Security numbers over the phone unless you are familiar with the company. This information can be used against you with other frauds. For example, if you give your checking account number over the phone to a stranger for "verification" or "computer purposes," the number may be used to debit (withdraw) money from your checking account.Ask to review any company's offer in writing, and make sure you understand the terms of the agreement before you complete the transaction.

What to Do if You Are a Victim

If you believe you have been victimized by a fraudulent advance-fee loan operation, contact your local consumer protection agency, Better Business Bureau (BBB), state Attorney General and Call For Action (202/537-0585; TDD 202/537-1551) to report the company.

You also may file a complaint with the FTC by writing to: Correspondence Branch, Federal Trade Commission, Washington, D.C. 20580. Although the FTC generally does not intervene in individual disputes, the information you provide may help to indicate a pattern of possible law violations requiring action by the Commission.

Where to Find Low-Cost Help for Credit Problems

First, try to solve your debt problems with your creditors as soon as you realize you will not be able to make your payments. If you cannot resolve your credit problems yourself or need additional assistance, you may want to contact a Consumer Credit Counseling Service (CCCS) office -- a nonprofit organization with more than 850 offices located in 50 states that counsels indebted consumers. CCCS counselors will try to arrange a repayment plan that is acceptable to you and your creditors. They also will help you set up a realistic budget and plan for expenditures. These counseling offices, funded by contributions from credit-granting institutions, are offered at little or no cost to consumers. Check the White Pages of your telephone directory to get the number for the CCCS office nearest you, or call 1-800-388- 2227 using a touch-tone phone. If you have other questions, write or call:

National Foundation for Consumer Credit
8611 Second Avenue, Suite 100
Silver Spring, MD 20910
(301) 589-5001

In addition, non-profit counseling programs sometimes are operated by universities, military bases, credit unions, and housing authorities. They are likely to charge little or nothing for their assistance. Or, you can check with your local bank or consumer protection office to see if it has a listing of reputable, low-cost financial counseling services.

Facts for Consumers from the Federal Trade Commission in cooperation with Call For Action, Inc., a Washington, D.C.-based international network of radio and television consumer hotlines

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