The advance fee loan scam: How to spot it and how to recover from it

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Summary:
An Advance Fee Loan Scam is when the victim pays money directly to someone after receiving a loan approval and in advance of receiving the money for the loan amount. Banks don’t work that way. This advance fee is often described as a processing fee, credit check fee, or other fee required to release the funds.

It’s a Federal crime for companies doing business by phone in the U.S. to promise you a loan over the phone let alone ask you to pay for anything before you receive it.

Please note: If loan scammers are in possession of your personal information, identity theft may occur. How do scams lead to identity theft?

Jump to:
General information
Should you pay an upfront fee for a loan?
Stealing your personal information
The advance fee pitch
How to avoid loan scams?
The red flags of loans scams
What to do if you’re a victim
Loan scam blacklist

General information

An Advance Fee Loan Scam is when the victim pays money directly to someone after receiving a loan approval and in advance of receiving the money for the loan amount. This advance fee is often described as a processing fee, credit check fee, or other fee required to release the funds.

This type of scam is thought to have originated in Nigeria and has spread from there. The types of loans often associated with the Advance Fee Scam fall in the category of personal loans that require less third-party substantiation and involvement like a mortgage or auto loan.

The personal loan amounts are usually in a range from the hundreds to the thousands.

The high loan amount offered, the low-interest rate quoted, and the easy application process sound too good to be true.

Financial institutions assist you in applying for a loan without a fee during the initial application process and never ask for an out-of-pocket fee after approval. If there are any fees, they will be subtracted from the loan amount. Their loan application process is also detailed and somewhat complex.

Should you pay an upfront fee for a loan?

Sometimes. In complex business loans, we subtract the inspection, appraisal, or certification fees from the final loan amount.

Another exception is the loan origination fee which often accompanies a loan but this is also subtracted from the loan amount after the loan is approved and granted. Not before. Again. A legitimate financial institution will never ask you to pay a separate fee out-of-pocket for a loan. Any fees that might apply are subtracted from the loan amount.

Our investigations into Common Scams of 2023

The advance fee loan scam is a two-step crime

First, they steal your personal and financial information

Scammers usually don’t hit the victim for the advance fee during the loan application process. The reason is simple. The information they ask for and usually receive from the application is often worth more than the advance fees they request during the second step of the scam. Rather than risk scaring someone off with an immediate request for money, they do everything they can to make applying for the loan easy and that includes no fee… yet.

Anyone familiar with a standard, legitimate loan application knows that the lender will ask for a lot of information, especially for a large loan. A scammer will ask for the same information regardless of the loan amount.

The information request from the scammer might include:

• Your name
• Your home address and email address
• Your spouse’s name and email address
• Your children’s names (Rarely requested by a legitimate lender)
• You and your spouse’s phone number
• Your place of employment
• Your salary
• Your spouse’s place of employment
• Your spouse’s salary
• Your Social Security number (Typically requested for a credit check by all lenders)
• Your spouse’s Social Security number (also typically requested for a credit check by all lenders)
• Your children’s Social Security Numbers (Never requested, unnecessary and another sign of a scam)
• Your checking account number and the balance (account numbers never requested)
• Your savings account number and the balance (account numbers never requested)
• A report of all of your investments including account numbers and balances (Rarely asked for and account numbers never requested)
• Life insurance policies including policy numbers (Never asked for, unnecessary and another sign of a scam. If the loan requires a life insurance policy such as some home loans, it will be in the contract and identified as Mortgage insurance which is required for VA and FHA loans)
• Your prior year(s) income tax returns (Sometimes requested by a financial institution)

Our investigations into Common Scams of 2023

This level and depth of information is a goldmine for a scammer and as noted, is significantly more than most legitimate financial institutions request. A scammer now has all of the information they need to steal your identity, your wife’s identity, and even your children’s. They also could attempt to access your investments to withdraw funds and even try to cash in your life insurance policies.

Second, they start to hit you with the advance fees

In a surprisingly short period of time, you receive a congratulatory message informing you that your loan has been “approved!” The message usually comes via text, email, or by phone.

Scammers may contact you by text or email, instructing you to go to their fake website or call a phone number. They may also begin the advance fee scam over the phone, which they may also advertise on their fake website.

Examples of initiation messages used by loan scammers

• Congratulations! Your loan for $25,000 has been approved! You’re only a few short steps away from receiving a wire transfer of the full loan amount directly into your checking account ending in -9644. (the scammer already has the account number). Now we just need to complete some finishing steps.
• Satisfy your loan origination fee. This is required by law and is necessary to finalize your payment schedule. The fee is $249.
• Complete your Insurance waiver so that you don’t have to satisfy the requirement for insurance on your loan. The fee for the waiver is $129. (No such thing)
• Reimburse us for your credit report which is required for any loan origination. The fee is $50. (Not)
• The fastest way to expedite payment is with a prepaid debit card that you can purchase from most retailers or by a wire transfer that we can help you set up. Once we’re done, the funds will be wire transferred to you and should be in your account within 24 hours. Please contact us as soon as possible. And once again, Congratulations!

Many victims fall for it and either continue to follow directions on the website to make the payments or call where the scammer effects the payments. The scam often continues as delays occur on the loan wire transfer and more fees are requested. Eventually, the scam abruptly concludes. The loan never shows up and the victim’s inquiries are ignored.

Our investigations into Common Scams of 2023

Avoiding advance fee loan scams

Applying for a loan is not an unusual activity. People do it all the time and due diligence is important even when you know you are dealing with a legitimate loan originator. However, many scams lurk in plain sight and there are always steps and checks you should perform whenever applying for any loan.

The red flags of loan scams

• The email, phone call or text message is unsolicited.
• There are errors in spelling capitalization, punctuation, sentence construction, basic grammar and vocabulary. Legitimate financial institutions are highly disciplined organizations.

• There is a general lack of professionalism in how information is communicated.
• There is a constant sense of urgency that borders on rudeness.
• The communication just doesn’t make sense, or they make statements that you know to be untrue about financial matters and transactions.
• Legitimate financial transactions are rarely conducted in cash or through gift cards, Western Union MoneyGram, PayPal, Prepaid debit cards or Bitcoin.

What to do if you’re a victim of the advance fee loan scam

Gather some proof

Collect your documentation and all records of the scam including screenshots of the website, phone numbers you called, printed and digital copies of applications, voicemails, text messages, anything you can get your hands on.

Try to recover your money

Depending on how you paid, you may be able to recover some of your money. Get in contact with the originator of the payment and explain the situation.

Contact the authorities

Contact your local police using their non-emergency number. Ask to fill out a police report so you’ll have an official record.

Contact your bank

If you gave the scammer any credit card numbers, call the credit card companies and ask for new credit cards after canceling your existing card(s).

Check to see if your personal information can be found on the dark web. You can check for free here. Service provided by Experian. TotalScam!™ will receive a small commission if you use our link.

Check your credit history for unauthorized changes

Periodically check with the credit bureaus to assess the status of your credit report and if anyone had tried to apply for credit in your name. You can get a free credit report from annualcreditreport.com.

Consider placing a credit freeze on your name through the FTC. This makes it harder for anyone to open an account in your name. If you want to open a credit account in the future, you will have to take some extra steps to do so.

On some levels, the advance fee loan scam may be one of the most damaging scams. The reason has to do with the level of information many people share in the belief they are applying for a loan. If you or someone you know has fallen for this scam, make sure you stay diligent and keep an eye on your credit and any identity theft activities affecting you or anyone else who’s information may have been recorded on a fraudulent loan application.

Consumers who have been contacted by loan scammers could have had their personal information breached. TotalScam!™ highly recommends that consumers whose information has been breached obtain identity theft protection service immediately.

There are several companies that offer identity theft protection in the US. One of the most inexpensive options we were able to find is the protection offered by LifeLock. You can start your protection here.

Disclaimer: The information and opinions contained on this site are not endorsed by LifeLock. TotalScam!™ receives compensation from LifeLock. This helps support our scam prevention efforts.

FAQ

Loan Scam Blacklist

The following phone numbers, websites, and emails have been reported to us by the consumer. If you feel this information is incorrect, you may submit a request for removal or correction by contacting us using this form.