Convincing Web Sites Aid Rise in Loan Scams
Victims Get Nothing In Return for Fees

By Annys Shin
Washington Post Staff Writer
Saturday, December 23, 2006

Judging by its Web site, Michelle Ford, a 35-year old loan adjuster from Charlotte, said Fairview Lending Group looked like a reputable company. Over two months, she sent Fairview $2,856 in collateral for a $20,000 loan that never materialized.

Dykelia Hall, 23, of Springfield, needed money for Christmas presents and turned to American Allied Financial which claimed to be located in a West End office building. She put $600 down on a $6,000 loan that she never received.

Monica Aliman, 34, of San Jose, wired American Allied Financial her November rent money in the belief that she would receive her $8,000 loan in time to pay her landlord. She said she thought it was odd she had to send money to get money.

"I thought I just didn't know enough about the loan process," she said.

Ford, Hall, and Aliman are among thousands of people who have fallen prey to what consumer watchdogs say is a recent surge in advance-fee loan scams, including several using addresses in the Washington area.

The scam has been around for decades. Many consumers are not aware that it is illegal to charge lending fees in advance. People with poor or no credit are enticed by ads, direct mail solicitations or telemarketing calls promising fast money at favorable terms.

The Internet has made it easier for scam artists to find victims. Consumers are drawn in by legitimate-looking Web sites, complete with privacy policies, customer service numbers and online loan applications. Soon after filling out applications, the victims typically receive phone calls saying their loans were approved, but because of their credit ratings, they must first wire deposits or collateral.

Once the consumers oblige, the promised loans never materialize. The victims can no longer get in touch with the company and, having given out their bank account and Social Security numbers, are also vulnerable to identity theft.

In 2005, consumer protection agencies such as the Federal Trade Commission, the Better Business Bureau and the National Association of Attorneys General received nearly 14,000 complaints about advance-fee loan and credit-protection scams, according to Consumer Sentinel, a government clearinghouse that collects data on consumer fraud and identity theft. Consumer protection agencies have issued warnings about advance-fee loan scams in Virginia, Nebraska, Ohio, Michigan, and Oklahoma during the past six months.

Law enforcement officials have trouble tracking down loan scammers, who typically operate outside the country, creating a roadblock of jurisdictional issues. "These rogue operatives move quickly and reopen under various names. The address provided by such firms are often false, non-existent or drop boxes," said Edward J. Johnson III, president and chief executive of the Better Business Bureau for metropolitan Washington.

The bureau said it has received more than 140 complaints this year about advance-fee loan scams, compared with 22 last year. It has also received more than 3,130 inquiries about advance-fee loan operations, up from 810.

Many of the complaints are about companies using Washington-area addresses.

Fairview Lending, for example, claimed to share the same Bethesda office tower as BET founder Robert L. Johnson's RJL Cos. and the law firm Lerch, Early & Brewer. Its name doesn't appear on the building directory. The building's management company, Realty Management, did not return phone messages. Fairview's phone number was not working as of Thursday.

American Allied Financial told consumers that it was located at 2100 Pennsylvania Avenue NW. Since mid-November, the concierge has turned away several angry consumers looking for American Allied's offices. A spokeswoman for George Washington University, which owns the office building, said it has never had a tenant called American Allied.

The company's toll-free phone number was not working on Thursday, and its Web site went dark earlier this week after the D.C. attorney general alerted the company hosting the site that American Allied was using a false address and hadn't responded to the agency's request for a response to consumer complaints.

Better Business Bureau letters addressed to Fairview and American Allied were also returned, Edward Johnson said.

Consumers didn't get wise to the scams until it was too late.

Ford was looking for a way to consolidate debt when she found Fairview through a Web site that promised to find the best lender for her within 48 hours.

Fairview said that because of her credit rating, it could offer only a $20,000 "collateral loan" that required three initial payments of $469.05. She was willing to pay because she was told the money would go toward paying off the loan.

After she sent the money, the loan didn't turn up in her bank account. When she called Fairview, she was told that the lender had evaluated her credit further and wanted four more payments. In early November, Ford sent them. Again, the loan didn't appear. She asked for her money back and was told she would have it by the end of November. Last week, when she tried calling the company and wasn't able to reach anyone or leave a message, she knew she had been scammed.

"I am extremely mad at myself to be taken for $2,800," she said. "That's a month's pay and with Christmas coming up -- I should've known. I should've picked up on it."

Hall said she needed money for Christmas presents and car repairs when she turned to American Allied Financial just before Thanksgiving. She found the company through a Google Web search.

"It did really look like a legitimate Web site," she said.

Hall thought it was odd that she had to wire money to Atlanta to get her loan, but "the holiday season was coming up and I thought I had better get it done," she said.

She was told her money would be available Dec. 8. When she checked, the money wasn't there. She called American Allied only to find its voice-mail box was full.

Hall, who does administrative work for a local advertising firm, is working extra hours to make back the money she lost.

When Aliman's money did not arrive, she looked up the company on the Better Business Bureau Web site, and found no records for American Allied before October 2006 -- when the company first called her.

Aliman, an office clerk for an electrical distributor, has since had to ask for two advances from her employer and has racked up $1,000 in overdraft charges.

"When you get set back like that, it's really hard to catch up," she said.