OHIOANS SHOULD BE ON GUARD AGAINST ADVANCE FEE LOAN SCAMS

 

The Office of Consumer Affairs, which was created in May to help prevent unscrupulous lending practices in Ohio, is warning Ohioans to be on guard against newspaper classified advertisements that promote advance fee loan scams. 

In a typical scam, phony businesses place classified ads to lure people who are having difficulty finding a loan due to past credit problems.  The ads urge the consumer to contact the business at a long distance telephone number in another state or in Canada. 

After soliciting financial information from the caller, they claim that they can find a private lender to finance a loan.  However, before the loan can be processed, they say that the consumer needs to make a down payment or purchase special mortgage insurance.  The consumer is then instructed to send between $400 and $2,000 to cover those costs by sending a money order out of state or to Canada. 

“When a mortgage broker demands money before they provide their services, this should raise an immediate red flag for every borrower,” said F. Scott O’Donnell, Superintendent of the Ohio Division of Financial Institutions.  “Legitimate brokers get paid at the time of the loan closing.  Do not send money to a mortgage broker in advance of receiving a loan.  In all likelihood, it will be the last time you see that money or hear from the so-called mortgage broker.”

In Ohio, the classified ads have been placed by unregistered brokers using the names Fairbrook Financial, Premium Financial and Stein & Richmond, but they could be operating under other names. 

Ohio law requires mortgage brokers to be registered through the Division of Financial Institutions and to include their registration number in any advertisement.  “We strongly encourage Ohioans to first check with the Division of Financial Institutions to learn if a mortgage broker is registered.  This can be done by conducting a search of mortgage brokers on the Division’s web site at www.com.state.oh.us/odoc/dfi or by calling the Consumer Hotline toll free at 1-866-278-0003.    

The Office of Consumer Affairs is notifying Ohio’s newspaper classified ad managers to help them identify and prevent the placement of bogus ads.   

To avoid being victimized in the lending process, Superintendent O’Donnell encourages potential borrowers to “Think first, borrow smart.”   “Do not fall for the advance fee loan scam,” he said.

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In an effort to reduce the growing number of consumers falling victim to abusive lending practices, Ohio legislators created the Office of Consumer Affairs in May 2002.  The office educates Ohioans on how to protect themselves in the mortgage lending process, receives complaints from those who have been victimized, and acts as a referral service to organizations that can assist the borrower.  If lending laws have been violated, the office initiates enforcement action and refers criminal cases for prosecution.