ABC News Fixer hears of a man taken into an advanced fee loan program.
June 10, 2014 ?? – Dear ABC News Fixer: I was trying to get a payday loan. The online lender asked me to send them a Green Dot MoneyPak card with $ 195 on it for insurance to secure the loan. They would put the funds directly on the card.
I asked them why they couldn’t just deposit the loan money into my bank account, but the loan rep said it was against federal regulations. So I took the card, scratched the number on the back, and read it to him over the phone. He said the funds would be available within half an hour.
Twenty minutes later he called back and told me my social security number was “flagged” and the money could not be sent. He said he could remove the “red flag” for $ 500 – a number their lawyer then lowered to $ 203.
At that point, I said I wanted my $ 195 back, but then they threatened to sue me for the loan balance – a loan I never received.
I now realize that it was a scam and I closed my bank account. They have probably done this to many other unsuspecting victims who are just trying to make ends meet.
– Kevin Whitney, Philadelphia, Pennsylvania.
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Dear Kevin: We’re sorry to hear you got ripped off over $ 195. That’s a lot of money, especially when the funds are already tight. We would like to thank you, however, for sharing your story with ABC News Fixer. You told us you wanted to make sure no one else got ripped off.
Payday loans aren’t a big deal to begin with – they’re short-term loans, with extremely high interest rates – but what you got involved with was an advance fee loan scam. . This is where a so-called lender says they’ll get you the funds, but only if you provide the money first – for loan fees, insurance, or whatever.
Such a scheme is prima facie illegal. Whenever a supposed lender asks for money up front, you should head for the hills.
The problem is, these bogus lenders can be quite sophisticated. We’ve heard from consumers who have been sucked into fancy ads and websites, with legitimate looking apps, and people posing as loan officers.
But if there is money required up front, it is a scam.
Legitimate lenders frequently add application, assessment, or credit report fees; however, they take it out of the amount you borrow once everything is approved. When someone asks for a large sum of money for fees before you get your loan, that’s a huge red flag, according to the Federal Trade Commission.
Consumers faced with an advance payment system like this can report it to the Internet Crime Complaint Center and the Federal Trade Commission.
As for the Green Dot MoneyPak, the reloadable debit card is a convenient way to make payments without a bank account or credit card. But some crooks have started to capitalize on this type of payment.
The National Consumers League’s Fraud.org website reports a slight increase in fraud cases involving reloadable debit cards such as Green Dot MoneyPak or Vanilla Reload cards. Some consumers have reported that fake debt collectors call them and demand payment on this type of card.
Cards are sold at thousands of major retailers nationwide. However, if the control number or PIN is shared, the money can be quickly embezzled. And unlike a regular credit or debit card, the victim has virtually no protection.
Meanwhile, the FTC has a few caveats for consumers looking for a payday loan online:
Do not give out personal information on a payday loan website. Even if you don’t click “Submit”, malicious websites can collect your bank account information from your keystrokes.
Read all the fine print. Beware of “lenders” who sign you up for a membership program for which you will be continually billed.
Keep track of your bank account and bills. Regularly reviewing your account statements will help you see where your money is going and identify fraudulent charges. If you see anything strange, immediately notify your bank and the billing merchant.
Look for alternatives to payday loans, like a credit union loan, and budget your money to avoid expensive borrowing.
– The ABC News Fixer
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