Psssst. Want some money?
You too can get a "guaranteed" loan. Just call this toll-free number, send in a few thousand dollars and. . . .
Sound good? What you might be buying is simply a chance to lose a few thousand dollars.
That's the message from the Better Business Bureau as it prepares to announce today that "a national epidemic" of loan scams is ripping off consumers and small businesses nationwide.
These so-called "advance-fee" loan schemes -- advertised in newspapers and magazines and on television and radio -- offer guaranteed money in exchange for fees ranging from $100 to $100,000 or more.
Pitched using come-ons such as "Money to Lend" or "Bad Credit -- No Credit -- No Problem," the scams have spawned tens of thousands of complaints and inquiries to the BBB nationwide, the bureau said. The Maryland chapter said that it has been receiving several hundred calls a month.
"This may be the fastest-growing fraud that Maryland residents are being exposed to right now," said Philip Kershner, president of the Better Business Bureau of Greater Maryland.
"Advance-fee loan schemes are particularly cruel since they take up-front money from extremely vulnerable customers -- the unemployed, people with bad credit and small business owners desperate for capital -- and then deliver absolutely nothing in return," Mr. Kershner said.
He declined to identify any of the firms that have been the target of complaints, saying he was unaware of any that had been convicted of a crime.
In one case, a Virginia businessman was told by a broker in Charlotte, N.C., that he could get a $2.75 million line of credit if he paid an upfront fee of $13,750, which was negotiated down to $2,500, the BBB said.
The broker said that he was backed by Asian lenders with access to hundreds of millions of dollars. But the North Carolina operation, which included a partner who had been found guilty of fraud in an earlier loan scheme, closed without providing any of the promised services, the BBB said.
J. Steven Lovejoy, an assistant attorney general who works with the state Office of the Commissioner of Consumer Credit, said that these types of credit companies are not allowed to receive fees until after services are rendered.
Further, a state law that took effect in July requires that people who offer to help repair credit histories or arrange additional credit must be licensed and bonded in Maryland.
Mr. Lovejoy warned that most of the loan schemes that are offered to Maryland residents come from businesses outside the state, making them more difficult to locate and prosecute. Further information on the loan scams and how to avoid them can be obtained by sending a self-addressed, stamped business envelope to: The Better Business Bureau of Greater Maryland Inc., 2100 Huntingdon Ave., Baltimore, Md. 21211-3215.
To verify that companies are licensed in Maryland to improve credit or arrange for credit, call the Office of the Commissioner of Consumer Credit at 333-6804.