A consumer recently posted this story on our forums, detailing her near-miss with a “bad credit loan” offer:

I was contacted about being approved for a $65,000 loan which I was receiving from "private lenders" because the banks turned me down. Because I'm high risk, I need to give the first 3 months up front. He really pushes the wire transfer (for the first three payments)...

After I got home, I saw the Credit.com news letter about loan scams and knew that this was one...

I have not given this thief any money and thank credit.com for the heads up and research tools.

This is one of the positive stories we’ve heard from people who have avoided advance fee loan scams. Others are not so lucky. We’ve heard after the fact from consumers who lost hundreds, or thousands of dollars, to these low-life “lenders” who will steal the very last dime of desperate borrowers.

Before you give money to an Internet lender who promises to give you a loan regardless of your credit rating, please come to the Credit.com forums and read the real-life stories!

The FTC also offers some tips for avoiding advance fee loan scams. Here’s a brief summary. Tip offs that may be dealing with a scamster:

• A lender who isn’t interested in your credit history. Banks and other legitimate lenders generally evaluate creditworthiness and confirm the information in an application before they guarantee firm offers of credit — even to creditworthy consumers.

• Fees that are not disclosed clearly or prominently. Unless you are dealing with a reputable, secured credit card issuer, an upfront fee that the lender wants to collect before granting the loan can be a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”

• A loan that is offered by phone. It is illegal for companies doing business in the U.S. by phone to promise you a loan and ask you to pay for it before they deliver.

• A lender who is not registered in your state. Lenders and loan brokers are required to register in the states where they do business. To check registration, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation. 

• A lender who asks you to wire money or pay an individual. Don’t use a wire transfer service or send money orders for a loan!

I’ll add another tip: Check out the domain name registration for the company. You’ll often find the website is registered overseas, anonymously, or has recently been established. If so, investigate carefully.

Please be careful. I'd like to hear your success story about how you avoided a rip-off, rather than read about how you've been taken.

National Consumer Protection Week is the perfect opportunity to protect yourself. We consumers now enjoy significant protections from adverse treatment by our credit card issuers under the CARD Act (get detailed information about the CARD Act's provisions). That's the good news. The bad news is that many of those protections require action on our part. It's not significant action. We just have to be more diligent and actually read our mail.



If our credit card issuers increase our interest rates or implement new credit card fees, they are required to give us a 45-day notice of the change. And, we have the right during that 45 days to opt out of the change and pay off the balance under the old interest rate terms. This is a significant protection from higher rates, but it requires that we proactively contact our issuers to opt out.

Roughly 97% of us do not read our bank notices. And, if we do not respond with our intention to opt out within the 45 days allotted to us under the CARD Act, then the issuer can increase our rates on all new purchases. So, Step #1 for protecting ourselves from higher interest rates and annual fees is to open all of the mail we receive from our credit card issuers -- and READ it.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

During National Consumer Protection Week, a good part of the focus is on helping consumers protect themselves from scams, fraud and rip-offs. To illustrate some of the issues consumers are struggling with, The Federal Trade Commission recently released its list of top complaints received in 2009: 

Rank Category / Number of Complaints

1. Identity Theft /  278,078 
2. Third Party and Creditor Debt Collection / 119,549
3. Internet Services / 83,067
4. Shop-at-Home and Catalog Sales / 74,581
5. Foreign Money Offers and Counterfeit Check Scams / 61,736
6. Internet Auction / 57,821 
7. Credit Cards / 45,203
8. Prizes, Sweepstakes and Lotteries /  41,763 
9. Advance-Fee Loans and Credit Protection/Repair / 41,448
10. Banks and Lenders / 32,443
11. Credit Bureaus, Information Furnishers and Report Users / 31,629
12. Television and Electronic Media / 26,568
13. Health Care / 25,414 
14. Business Opportunities, Employment Agencies and Work-at-Home Plans / 22,896
15. Computer Equipment and Software / 22,621

I always find these lists interesting, because they are made up of consumers who actually took the time to file a complaint with the FTC. How many other people were ripped off, or had problems, but suffered in silence?

Later this week, I'll detail one of the scams on this list that's costing consumers hundreds - sometimes thousands - of dollars. But in the meantime, I want to remind everyone how important it is that we speak up if we have been taken. No matter how embarrassed (or busy) you are, if your complaint helps one other person, then it's worth it. You are just as an important part of the consumer protection effort as any government agency.

Fortunately it's easy these days to get the word out about rip-offs or problems. Here are several places to file a complaint/share your story:

FTC.gov The Federal Trade Commission won't get involved in solving your actual complaint, but if they see a pattern of abuse, the can step in. Case in point: Operation Clean Sweep, aimed at fraudulent credit repair firms.

Credit.com Forums: Post your experiences with credit-related scams. We have heard from several consumers who found our forums just in time to avoid being ripped off.

IC3.gov: The place to go to report white collar crime.

Stay tuned this week as we detail more ways to protect your hard-earned money.