A Chelmsford woman is trying to pick up the pieces after being scammed out of $2,000 by what she thought was a legitimate company.
The woman, who requested that she remain anonymous, came across the company in February when she was looking online for a way to consolidate some of her debts.
"I went online and did some research and filled out a couple of applications and one of the companies that I had applied with got back to me," she said.
"They sent me a contract, I called them and asked a lot of questions, did some research and I spoke with someone who had a financial background and they even thought that it looked legitimate."
The woman was then asked to e-transfer money up front in order for the company to begin consolidating her debts.
"I made a transfer at the beginning of March and the middle of March," she said. "In total I paid roughly $2,000."
The Better Business Bureau of Eastern and Northern Ontario stated in an email on April 28 that these types of advance fee loan scams are becoming more prevalent, especially in the midst of the COVID-19 pandemic with many Canadians out of work.
"With the Coronavirus taking a toll on Canadian finances, a lot are turning to lenders to make ends meet," said the Better Business Bureau. "Sadly, we are receiving many complaints from consumers all over the country who fall victim to fake lenders and they end up losing thousands of dollars."
Advance fee loan schemes target individuals who are experiencing difficulty in obtaining cash or credit. With legitimate appearing websites and the promise of a guaranteed loan regardless of credit history, it’s easy to fall prey.
Advance fee loan brokers often use false business names, false addresses or virtual offices, and telephone numbers that are difficult to trace.
The woman was able to stay in contact with the company after making her second e-transfer in mid-March, but became suspicious when she started getting the runaround from the scammers.
"I continued to be in touch with them, trying to figure out what was going on and they were telling me it was going to be wire transferred which would take about a week then they said it would be direct deposit like a paycheque," she said.
"There was always glitches, there was always something going on. Then when they tried to get me to make a third payment I said no and that I just wanted my money back."
The woman was then told by the fake lending company that it could take four to six weeks for her to be refunded, and was later told that due to COVID-19, it could take up to eight weeks before she had her money returned.
"Now the website is down and I can't get ahold of them," she said. "I went to the police and they basically told me there was nothing they could do. They called me and I had a five minute conversation with the officer and they told me this happens all the time and there wasn't anything they can do."
The Better Business Bureau explained that these scammers will use the name or physical address of a legitimate company in order to give themselves credibility. Applicants are directed to make a money transfer, usually around a thousand dollars, under the pretense of an administration fee, an insurance fee, a processing fee, etc.
Once the victim sends the money, the loan never materializes and refund attempts are usually futile.
"They seemed legitimate, their paperwork looked legitimate and a financial expert looked at it and said it looked fine and it looked like they had a brick and mortar location," she said. "They said they were based out of Kanata. I said I could deal with some extra time to receive my repayment due to the COVID-19 situation and I was taken advantage of."
The company disappeared, their website and phone line became inaccessible. According to the Better Business Bureau, the crooks will often create a new company with a new website and start their scheme all over again.
"It’s important for consumers to know that requiring advanced fees in order to get a loan is illegal in Canada," said the Better Business Bureau.
The woman is hopeful that by sharing her story she will prevent others from falling victim to similar scams.
"It caused a lot of strain on my relationship,” she said. “I'm just trying to pick up the pieces and move on.
"There's no way to regain the money due to the fact that I can't find them. These people are out to hurt people and cause extreme hardship. You think it's something that's there to assist people and help alleviate the pressure but they're just making things worse for people. Especially now with more people looking for help, it's making things easier for these scam artists."
Better Business Bureau tips on how to avoid falling for this scam:
- It is illegal in Canada to charge any type of fees to guarantee a loan or interest rate. Any up-front fee you need to pay before getting the loan is a cue to walk away. If there are charges, they will clearly state it and they will deduct it directly from your loan.
- Real lenders never guarantee a loan in advance. They will check your credit score and other documents before providing an interest rate and/or loan amount. Fees are never paid via wiring money, bitcoins or gift cards. Unusual payment methods and payments to an individual are a big tip off.
- Lenders and loan brokers must register where they do business. To verify registration in Canada, contact the Office of the Superintendent of Financial Institutions.
- Check the brokers website creation date through another website called ‘Who.is’. If you notice that the creation date is recent, that is a big red flag.
- If you can’t obtain money or credit from your local financial institution, such as banks and credit unions, why is a far-away lender more likely to provide you with money at a lower interest rate?
- Be suspicious when you’re offered an unbelievably low interest rate! If you have a bad credit score, the interest rate will automatically be higher. Per example, a loan through a payday loan company varies between 19.99 per cent up to 46.96 per cent. With illegal advance fee loans, they promise rates between 5.9 per cent and 12 per cent. If it sounds too good to be true, it probably is.
- Verify for incongruous information on contracts. Per example, a business with an Ottawa address, but a phone number from Sudbury.
- The last tip is to call your Better Business Bureau before you choose a lender. Our operation team specialists will give you important information and will tell you if there are active complaints about the company. This could save you thousands of dollars.
