Posted by Elisabeth Leamy, Fri Nov 16 2007, 10:24pm

The Better Business Bureau is warning consumers that an old ľand devastating–scam is back in a big way

The Better Business Bureau is warning consumers that an old ľand devastating–scam is back in a big way. It's called an "advance fee loan scam." Here's the deal. Lenders are not allowed to guarantee you a loan in exchange for fees you pay in advance. It's a true scam ľnot just a rip-off–because you pay money up front then get NOTHING.

The BBB says consumers across the country have filed complaints about a Chicago-based outfit. The complaints allege that the company requested up front fees ranging from $700 to $2,775 in exchange for loans. The consumers sent in their money, but not one of them received a loan.

The advance fee loan scam has always been cruel, because it targets people who are down on their luck: the unemployed, the poor, and people with bad credit. The ads appear in the newspaper, on telephone poles and on the Internet. Telemarketers also hawk advance fee loans. Don't fall for it! The bad guys have no intention of giving you a loan or a credit card. It's actually illegal to guarantee somebody a loan in exchange for a fee.

A telemarketer promised Jennifer P. a low interest credit card with no annual fee. All she had to do was send a $199 processing fee and the offer was guaranteed. The one-day special even included her choice of a laptop computer or satellite dish. The telemarketer was friendly and persistent, and Jennifer fell for it. She waited weeks and never received her credit card. She tried to contact the company but it had disappeared.

It's easier to spot an advance fee loan scam if it comes in the form of a credit card, because normally you don't have to pay out any money to get a new piece of plastic. But sometimes the advance fee loan is a mortgage and that can be confusing. After all, when you get a mortgage, you DO shell out all sorts of money for credit checks and appraisals and surveys. The key is that the scammers want the money in advance. Normally, fees associated with mortgages aren't paid until closing.

Unsure? Type the name of the lender into a search engine along with the word "scam" and see what comes up. If it's a fraudulent offer, chances are other victims have left a trail of breadcrumbs for you to follow. If you're still not certain whether the offer is legitimate, contact your state or county consumer affairs office or the Better Business Bureau for guidance.

Know the signs:
1. Be suspicious of companies that claim they'll guarantee you a loan despite bad credit, bankruptcies, or unemployment. That's suspicious. Legitimate lenders base their decision on whether you'll be able to repay your loan.
2. If the salesman says you are guaranteed to get a loan, walk away. No bank can guarantee you a loan up front.
3. If the company asks for a lot of money up front, that's wrong, especially if it's a generic "processing fee." A real lender may ask for money to cover a credit check, but credit checks don't cost very much. Credit card companies almost never charge for credit checks.
4. If the company claims it will refund your money if you don't get a loan, don't believe it. That's a common claim and part of the scam.
5. Advanced fee loan scammers sometimes ask you to call a 900 number to choose the loan you want. They then try to keep you on the line as long as possible to rack up 900 number charges.
6. If the company wants you to forward your payment by some method other than U.S. mail, be very wary. The company is probably trying to avoid mail fraud laws.
7. Many advance fee loan scams originate in other countries. Canada is the most common. I've also heard from consumers who sent their advance fees to companies in the Caribbean.

Do your homework:
1. Never agree to a loan over the phone. Insist on seeing written documentation. If the company refuses, run the other way!
2. Never give out your social security number, bank account number or credit card number over the phone, unless you initiated the call.
3. Lenders may have to be licensed and bonded in your state. Find out if that's a state requirement and find out if the company in question has met that requirement.
4. Know the difference between an advance fee loan and a secured credit card. Secured credit cards are legitimate tools for people who are trying to re-establish good credit. You deposit, say, five hundred dollars with the credit card company. The company issues you a card with a five hundred-dollar limit. You get the flexibility of paying by credit card instead of cash or check. If you make payments faithfully, the credit card company eventually increases your limit and refunds your deposit.

How to complain:
If you are the victim of an advance fee loan scam, it's a criminal matter. Contact your state attorney general. If the company is based in another state or country, you may have to go to the FBI. Also complain to the Better Business Bureau so other consumers will be forewarned.