Con artists prey
on stressed-out debtors
With many Americans out of work,
401(k)s emaciated and the stock market depressed, over-extended
and stressed consumers are looking for a credit fix. They need not
look far to find offers of instant loans or credit cards. But are
they legitimate? Not usually.
One wildly popular scam, called an advance-fee scam,
offers the consumer an instant loan or credit card to ease their
credit problems. It's one of the nation's top telemarketing scams,
and con artists rake in millions of dollars each year from unsuspecting
students, the elderly, the unemployed, the working poor or people
in need of fast money for emergencies.
"Advance-fee loan scams are especially
appalling because they prey on the most vulnerable consumers who
are in need of credit or a loan," says Jodie Bernstein, director
of the Federal Trade Commission's Bureau of Consumer Protection.
In this scam, con artists call the would-be victims using "sucker
lists" -- names and phone numbers of potential victims -- or
they lure victims with ads on the Internet, television or newspapers,
promising loans for people with bad or no credit. They use legitimate-sounding
company names and offer credit cards, loans or debt relief, but
at a price -- anywhere from $45 to several hundreds of dollars.
Victims are told they are paying for processing fees or credit checks.
What do the victims get in return for these fees?
"In these cases nobody ever gets a credit card,"
says Steven Baker, Midwest Regional director of the FTC. "They
get lists of names or cards that are good only for that company's
items. They give no credit whatsoever."
Same show, bigger audience
The advance-fee scam is not new -- but it's growing rapidly. According
to the FTC, Americans lost $5.3 million in 1999 in similar cross-border
telemarketing fraud -- 71 percent of that was from criminals based
in Canada. But that figure jumped to an estimated $36.5 million
lost in 2001.
"We are really having an explosion of problems
with it now," says Baker. "The FTC has gone after at least
a dozen of these cases in the past year. A lot of these companies
are based in Canada, but they may use a different address, then
move the money."
On Dec. 9, a federal district court in Illinois halted
the practice of a Toronto-based operation while the FTC pressed
charges. The enterprise, operating under five separate names, promised
consumers a major credit card, charged an advance fee for it, and
never delivered the credit card. Canadian law enforcement assisted
in the case.
California college student Veronica Washington
thought she was paying her credit card debt and rebuilding her troubled
credit. Instead she became a victim.
"A company called Total Benefits called my cell
phone. I was caught off guard. She (the caller) was going so fast.
She kept saying 'We're helping people rebuild their credit status
with Visa.' I had a Visa. I said, 'Which one?' She rattled off a
list of banks. One of them was the one I had a credit card with
in the past. I thought, "I do need to pay that one off."
Believing she was paying her debts, Washington cooperated
with the caller.
"I was led to believe this was an agency calling
on behalf of one of the companies I had an account with," says
She said she was told that her credit with Visa would
be rebuilt and she would get a new credit card. Five days later,
$198 was charged to her bank account. A few days later, she received
her only written correspondence from Total Benefits -- a one-page
list of banks that offer credit cards, with a few names of credit
counseling services at the bottom.
"I called the company to try and get my money
back," says Washington. "The guy on the phone said 'Well
you haven't been turned down for a credit card by those banks, have
you?' I told him this was illegal. He said it wasn't."
But according to the FTC, it is illegal.
Jackie Wong, a supervisor in Total Benefits'
customer service department, gave only a brief comment.
"We assist people to get credit cards,"
said Wong. "If they have problems we give them their money
Crooks in Canada
"The law prohibits charging people in advance
prior to providing a credit card. People who call offering you credit
who want money in advance -- they are crooks," says Baker.
When Washington called Total Benefits to ask for their
address, she was given an address in Barbados. She asked for the
"How do you know about the Canadian address?"
said Frank Nickel, a man who identified himself as a manager at
Total Benefits. He told her the only address he would give her was
the one in Barbados. He also told her that Total Benefits got her
name off a list of people who had recently been denied credit.
But where did this list come from?
"That's a good question," says Baker. "There's
an industry of people who sell this information. Sometimes it's
hard to track. As far as (Washington's case), either they lied about
having a list, or not. Who knows? There are list brokers out there.
I'm sure it would be a violation of privacy laws."
Washington's case was peculiar, because the telemarketer
who called her wasn't just offering a credit card. She allegedly
represented herself as working specifically with a bank with which
Washington had debt.
"As far as calling your mobile and saying you
have debt with them, that's a new one to me," said Baker.
Washington's bank has refunded her $198 while
they investigate and, though she was embarrassed about her situation,
Washington reported her case to the FTC.
"You have to complain," says Baker. "Call
1-877-FTC-HELP or file a complaint online.
This is not a couple of guys in a hotel room. These are multi-million
"This is something they should not be doing,"
says Washington. "They are preying on people. I'm thoroughly
offended that there are people out there like this."
Don't talk to cons
To avoid becoming a victim of the advance loan
scheme, hang up on anyone who calls offering you a credit card,
loan or offers to repair your credit. The FTC says to beware of
lenders who guarantee or say you are likely to get a credit card
or loan before you apply.
If you don't have the credit offer confirmed
in writing or if you are asked to pay before receiving a credit
card or loan, hang up. And never give your bank account, credit
card, or Social Security number to anyone but a company you are
positive is legitimate and has good reason to request this information.