The Federal Trade Commission has posted the following advice for avoiding loan scams. Consumers looking for loans are very vulnerable to scams, especially online.

Advance-Fee Loan Scams: ‘Easy’ Cash Offers Teach Hard Lessons
Looking for a loan or credit card but don’t think you’ll qualify? Turned down by a bank because of your poor credit history?

The FTC says some red flags can tip you off to scam artists’ tricks. For example:

Fees that are not disclosed clearly or prominently. Scam lenders may say you’ve been approved for a loan, then call or email demanding a fee before you can get the money. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”

Legitimate lenders often charge application, appraisal, or credit report fees. The differences? They disclose their fees clearly and prominently; they take their fees from the amount you borrow; and the fees usually are paid to the lender or broker after the loan is approved.

It’s also a warning sign if a lender says they won’t check your credit history, yet asks for your personal information, such as your Social Security number or bank account number. They may use your information to debit your bank account to pay a fee they’re hiding.

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 uses a copy-cat or wanna-be name. Crooks give their companies names that sound like well-known or respected organizations and create websites that look slick. Some scam artists have pretended to be the Better Business Bureau or another reputable organization, and some even produce forged paperwork or pay people to pretend to be references. Always get a company’s phone number from the phone book or directory assistance, and call to check they are who they say they are. Get a physical address, too: a company that advertises a PO Box as its address is one to check out with the appropriate authorities.

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. Checking registration does not guarantee that you will be happy with a lender, but it helps weed out the crooks.
A lender who asks you to wire money or pay an individual. Don’t make a payment for a loan or credit card directly to an individual; legitimate lenders don’t ask anyone to do that. In addition, don’t use a wire transfer service or send money orders for a loan. You have little recourse if there’s a problem with a wire transaction, and legitimate lenders don’t pressure their customers to wire funds.

Where to Complain
If you think you’ve had an experience with an advance-fee loan scam, report it to the FTC.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.