Advance Fee Scams

How to Avoid Advance Fee Scams

Learn to recognize and avoid advance fee scams where you are tricked into paying money up front in order to receive something of greater value.

What are Advance Fee Scams?

Advance fee schemes describe a situation when a victim agrees to pay money up front with the expectation they will receive something of great value (a loan, contract, investment, or gift), but then receives little to nothing in return for their “investment”.

Advanced fee schemes come in many shapes and sizes, limited only by the imagination of the criminals offering them. They could involve the sale of products or services, investment opportunities, lottery winnings, or “found money” to name a few.

Scammers have been known to offer finding financing arrangements for their potential victims, if the victim agrees to pay a “finder’s fee” in advance. The deal is usually sealed with a contract including language that the victim will agree to pay the fee when they are introduced to the financing source. Only after signing the contract and paying the “finder”, do victims learn they are disqualified for the financing.

The victim in this case can only get remuneration if they can show that the “finder” never had the ability or intended to provide the financing. Without that, these contracts are considered valid and legal.

Advance Fee Scam Red Flags

There are a lot of tricks used by these scam artists to make everything sound reasonable. You might be told that the money is for a loan processing fee, closing costs or a credit check. It doesn’t matter what they tell you because no bank needs to collect a fee to run a credit check. They have that kind of information right there at their fingertips.

We want to point out that a lender could require a fee in for a loan, especially a large or risky one but the fee will be nominal. If the amount reaches hundreds or thousands of dollars you should back out immediately because you’re not dealing with a legit lender.

You may have closing costs for a property purchase but not a personal loan. If you do fall for this you will either never hear from the “lender” again or they will inform you that your loan request was denied and the advance fee you paid is non-refundable. Either way you will never see any of that fee money again. Be on your guard for requests regarding your bank credentials (PIN numbers etc). If you’re told they need this to transfer the money to you do not give it to them! If you do they could simply drain your funds and vanish.

Some Guidelines on How to Avoid Advanced Fee Schemes:

  • Follow the saying, “If something seems too good to be true, then it probably is”. Stick to common business practices. Never consider business being carried out on the street corner in cash as legitimate.
  • Be sure you know who you’re trading with. If you aren’t familiar with the person or company you plan to do business with, learn more about them. Ask a lot of questions. Visit their location, do your homework, look them up with the Better Business Bureau and/or consult with family, friends or an attorney.
  • Money spent up front to pay an attorney to review complex business agreements can save you even more money in the long run. If you don’t understand the terms of the business 100%, have them examined by a knowledgeable and recommended attorney.
  • Businesses that operate out of post office boxes, mail drops and/or don’t have a street address should be dealt with suspicion. Also be wary of those who don’t have a direct phone line, can’t be reached and must always return your call at a later date and time.
  • Be cautious of business deals requiring you to sign nondisclosure or non-circumvention agreements. These agreements can prevent you from verifying the legitimacy of those doing business with you. Scammers use these agreements as a threat of civil suits to victims if they report their losses and business activity to law enforcement agencies.

Scholarship Fees

Never pay a fee upfront for offers to search for scholarship information. This is unnecessary as you can find the same information yourself, for free. School counselors and librarians are great resources for help in researching scholarships.

Email Loan Offers – a deal too good to be true

Mixed in with the rest of your email you may come across loan offers that guarantee you an unsecured loan regardless of your credit history. This will be music to the ears of many people desperate for some quick cash. The person sending these emails knows that, too. They also know that someone out there is going to see their loan offer and consider taking them up on it.

Think hard before accepting such an offer no matter how tempting or how much you need the money. Responding to unsolicited email offers is seldom, if ever, a good idea. If you do respond and begin the loan process there’s one thing in particular to be on the lookout for: an advance fee.

Advance Fee Internet Scam Warning Signs:

  • Even being asked for an advance fee to get a loan is your first warning sign. Lenders do not typically as for fees up front when you are applying for a loan and if they do it will not be at most a small processing fee.
  • Getting offers for loans in the form of unsolicited emails is unusual for legitimate lending institutions like banks. You usually go to them and ask if you can borrow money. Someone seeking you out to loan you money should raise red flags immediately.
  • If you have bad credit and are guaranteed that you will get a loan you should start to question the validity of the loan offer. We hate to break it to you but legitimate lenders seldom, if ever, loan money to people with bad credit. If you know you have bad credit and you are promised that a loan is guaranteed if you pay an advance fee you should be suspicious.
  • If the lender refuses to give you your loan details in writing you should not do business with them. This is a common scam technique that you should question immediately. Legitimate lenders always give you a full rundown of the full cost of a loan. This means you will know your interest rate, length of time to pay the loan off, payoff amounts etc. Never sign any financial papers if you feel you are not being provided enough information.

2 Responses

  1. Robert Riddick says:

    How does someone report one of these advance fee internet scams in order to get your money back

    • Chima Ubochi says:

      I’ve also been scammed. I think the best advice is to speak to the FBI. You can also join Anti fraud groups on FB.

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