British Columbians are “extremely susceptible” to advance fee loan scams – one of the riskiest scams in Canada – to which they are losing at least $1,000 each, according to the Better Business Bureau (BBB).
“Advance fee loans, the second riskiest scam in Canada for 2019, continues to wreak havoc for B.C. residents in a financial bind because of the pandemic,” according to the BBB, which is warning consumers, who may be urgently trying to acquire funds, to be on “high alert” to avoid losing money and exposing their personal information.
The BBB says that the reports its received from victims across the province show consumers are extremely susceptible to the scam.
As part of the scam, the BBB says consumers may receive an email or phone call, or – as in the case of more recent reports to the bureau’s Scam Tracker – a pop-up ad online or find a website while searching for a loan company.
In this con, scammers disguised as loan brokers and other lending institutions advertise and promise loans to those in a financial bind. The loan, which is guaranteed regardless of credit history, comes with upfront charges labelled as “taxes,” “insurance” or “processing fees.”
However, when the charges are paid, the loan never materializes and the applicant is left with larger debts. The BBB says that requiring advance fees for loans is illegal in Canada
“Typically, the scammers will ask you to pay a fee for a seemingly legitimate reason,” said Karla Laird, the BBB’s manager for community and public relations.
“Oftentimes, they require that payment to be made by wire transfer, bitcoin or some other hard-to-recover method. However, once the fee is paid, the phony loan company stops communication and the consumer cannot get a refund.”
Vancouver man loses nearly $1,500
In one instance of the scam, which was reported to the BBB, a Vancouver resident lost nearly $1,500 to a company he found online with an Ontario address on its website.
The company told the Vancouver man his loan was approved for $10,000 at the rate of seven per cent for four years, however, the company needed a three-month advance payment in order to release the funds – a total of $718.
The company also told the man that his credit is high risk, so he would need to pay $1,500 insurance for the lender, although the company would cover half. The company wanted the Vancouver man to send the money using Bitcoin.
The company, Kingsway Lending, according to the BBB, is using the address of a Canada Revenue Agency office in Ontario.
“Scammers understand that consumers are searching for websites that look professional, and will put effort into making your loan application process feel like the real deal,” said Laird.
“With this in mind, thorough research on a company before initiating any transactions, is the best way to avoid being tricked out of your money and personal information.”
What to look out for
The BBB says consumers should look out for the following red flags is they are searching for a lender or loan broker:
- You receive unsolicited communication (phone call, text message, email) offering an easy loan.
- The lender's website is hard to find, the company has very little online presence and limited online history. Also check to see if they are on social media and on professional platforms like Linkedin.
- The lender is not registered in your province. Lenders and loan brokers must register where they do business. If they are offering payday loans, check Consumer Protection BC to confirm if they have a license to operate.
- You cannot confirm the physical address of the location. Based on your research, the address seems to belong to another business or organization. Check the municipality where the business is located to see if they have a business license.
- The company is not accredited with BBB; you cannot find a BBB Business Profile for them; they have a negative business rating on their Business Profile; and/or have several negative reviews and complaints from consumers.
- No credit check is required to get the loan and your approval is guaranteed. Legitimate lenders never guarantee a loan in advance. They will check your credit score through one of the major credit bureaus and request additional documents like proof of income and employment before providing an interest rate and/or loan amount. They will never ask you to pay an upfront fee.
- Your offer has a very short deadline, giving you very little time to consider your options and get additional feedback from those you trust.
- Regardless of the reason, you are required to make a payment upfront to get a loan. A legitimate lender will collect fees from the money they are lending you or through the interest charges when you are repaying the loan. A scam lender may try to collect them as a condition for you getting money.
- The lender accepts payment in the form of gift cards, bitcoin and wire transfers. Unusual payment methods or payments to an individual are sure signs that something is wrong.