There are many ways that scam artists try and get bad credit car loan buyers to part with their money.
Many of the victims are consumers with bad credit
At AutoNet Financial, we come into contact with bad credit car loan applicants every day. These are consumers who, for various reasons, have fallen on hard times and have credit histories that reflect this. They are also folks that are genuinely interested in reestablishing their car credit and raising their FICO scores so that, once again, they can finance a car with a regular car loan. Because people like this are especially vulnerable to credit scams, we want them to be aware of some of the more questionable loan practices.
The Federal Trade Commission
The Federal Trade Commission (the FTC) is in charge of monitoring and enforcing government regulations when it comes to consumer finance. As part of their mission, they study the methods of scam artists and alert consumers to many of these rip-offs. According to the FTC, these scams often target consumers with bad credit problems or those with no credit. In exchange for an up-front fee (you pay before the service is performed), these companies “guarantee” that an applicant will get the credit he or she wants (usually a credit card or a personal loan).
Since this is an unsecured loan, unlike a car loan it can be done by phone, over the internet or through the mail (more about that later), since there is nothing that secures the loan (such as a vehicle or piece of furniture).
The up-front fee for this so-called “service” can be as high as several hundred dollars. As for their take on this practice, the Federal Trade Commission advises consumers to “resist the temptation to follow up on advance-fee loan guarantees. They may be illegal.”
Remember that while many legitimate creditors extend offers of credit, (such as credit cards, loans, and mortgages) through telemarketing and require an application fee or appraisal fee in advance, these fees are generally less than $50. Also, it should be pointed out that legitimate creditors will never guarantee, in advance, that you’ll get the loan.
Here is one more important point: according to the FTC, under the federal Telemarketing Sales Rule, “a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or receive payment until you’ve received the loan.”
Don’t “show them the money”
Ads for advance-fee loans often appear in the classified ad section of local newspapers and magazines. Remember, just because a magazine is legitimate doesn’t mean they screen all their ads – especially the small ones in the classified sections. These ads also may appear in mailings, radio spots, on local cable stations and on the internet as part of a blind web site. Often these ads feature “900″ prefix phone numbers, which, if called, will result in charges to your bill. In many instances these 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.
If you do your research, you won’t confuse a legitimate credit offer with an advance-fee loan scam. An offer for credit from a bank, savings and loan, or mortgage broker generally requires your verbal or written acceptance of the loan or credit offer. The offer usually is subject to a check of your credit report after you apply to make sure you meet their credit standards. Usually, you are not required to pay a fee to get the credit.
In their article the FTC mentions one other thing – hang up on anyone who calls you on the phone and says they can guarantee you’ll get a loan if you pay in advance. This kind of solicitation is against the law.
Tips from the feds
Here are some tips to keep in mind before you answer an ad that promises easy credit, regardless of your credit history:
• Most legitimate lenders will not “guarantee” that you will get a loan or a credit card before you apply, especially if you have bad credit or a bankruptcy.
• It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. You also may have to pay a processing or application fee.
• Never give your credit card account number, bank account information, or Social Security number out over the telephone unless you are familiar with the company and know why the information is necessary.
The Bottom Line
At AutoNet Financial we not only want you to improve your credit, we also want you to avoid situations in which scammers can take advantage of you. Remember, “if it sounds too good to be true, it probably is”.
