Borrower Beware

While payday loans are not a financially sound way to borrow, they are legal. However, there are loan schemes in the marketplace that are just plain illegal. These loan schemes prey on financially vulnerable individuals or businesses trying to access money.

Advance Fee Loans – “Hook, Line and Sinker”

These loans are advertised by loan brokers typically on-line or in the classified section of local newspapers.
The “hook” is a guaranteed, low interest loan available to either consumers or businesses who want a quick, affordable way to get access to additional cash or consolidate debt.
The “line” is, before your loan can be advanced the broker requires the borrower to pay an up front fee. This fee is supposed to pay for administration costs, first payment or other loan expenses.
The “sinker” – the loan funds are never advanced and the fee is never returned.

It is absolutely illegal in Canada to require a consumer to pay in advance, for any loan. This should not be confused with mortgage or other brokers who arrange real estate or other loans for a financial institution. Always make sure you know who you are borrowing from and if in doubt, check with us, another financial institution or the Better Business Bureau of Canada at www.ccbbb.ca.

Fraudulent Credit Counselor – Money for Nothing

In this case, a consumer trying to consolidate debt and perhaps avoid bankruptcy, goes to a debt consolidator/counselor in order to receive debt counseling and begin a debt management program. Services include interest rate negotiation and managed payments. These counselors charge a fee for their services. A fraudulent debt consolidator will take the fee and run – never doing any of the debt consolidation work. Unfortunately, the consumer does not find out until they become past due on credit cards or loans they thought were being taken care of by the debt consolidator/counselor. Not only are they out of pocket the service fee, they face additional charges and interest, as payments were not made in a timely manner. Again, always make sure that you know who you are working with. Check them out through us, the Better Business Bureau or one of your creditors.

Before you put yourself in a situation where you could fall prey to these types of schemes – talk to us. As your financial advocate, we want to help in any way we can to improve your financial health.