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

Recognizing An Advance-Fee Loan Scam
The vast majority of legitimate lenders are owned and managed by professionals. But fraudulent loan brokers and other individuals misrepresenting the availability of credit and credit terms definitely are in business. One of their favorite strategies is the "advance-fee" loan scam. That's where you are guaranteed to get a loan or other type of credit — but you must pay before you apply.

Advertisements that promise loans generally appear in the classified section of local and national newspapers and magazines. They also may appear in mailings, radio spots, and on local cable stations. Often, these ads feature "900" numbers, which result in charges on your phone bill, or toll-free "800" numbers. Unfortunately, advertising in recognized media outlets does not guarantee the legitimacy of the company behind the ad. In addition, 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.

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. Indeed, small businesses have been charged as much as several thousand dollars as an advance fee for a loan. Whether you are an individual consumer or an owner of a small business, the result is the same: you don't get your money; the con artist does. And once con artists get your money, they disappear.

Don't confuse a legitimate pre-approved credit offer with a legitimate pre-qualified offer from mortgage brokers, banks, savings and loans, and credit unions. A pre-approved offer requires only your verbal or written acceptance. A pre-qualified offer means you've been selected to apply. However, you still must go through the normal application process, and you still can be turned down.

If someone guarantees — or states — there's a strong chance they can arrange to get you a loan or other form of credit, be suspicious. And if you're asked to pay before you receive the loan or credit offer, hang up. It's against the law.

Protecting Yourself
According to the Federal Trade Commission's (FTC) Telemarketing Sales Rule, if someone guarantees or suggests that there is a strong chance they can get or arrange for a loan or other form of credit for you, they cannot ask you to pay — or accept payment — for their service until you get your loan or credit.

Here are some points to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:

• Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

• If you apply for a real estate loan, it is accepted and common practice for lenders to request payment for a credit report or appraisal. However, legitimate lenders never ask you to pay for processing your application.

• Never give your credit card account number, bank account information, or Social Security Number over the telephone unless you are familiar with the company and know why the information is necessary.

• If you don't have the offer in hand — or confirmed in writing — and you are asked to pay, hang up. It's fraud and it's against the law.

If You Are A Victim
If you think you've been a victim of an advance-fee loan scam, contact your local consumer protection agency, Better Business Bureau (BBB), state Attorney General, or Call for Action (202-537-0585; TDD: 202-537-1551) to report the company.

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

Finding Low-Cost Help for Credit Problems
It's a good idea to try to solve your debt problems with your creditors as soon as you realize you won't be able to make your payments. If you can't resolve your credit problems yourself or need additional assistance, you may want to contact a credit counseling service. There are nonprofit organizations in every state that counsel indebted consumers. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also will help you set up a realistic budget. These services are offered at little or no cost.