Advance-fee loans take consumers for a ride
Saturday, October 28, 2006 11:31 PM PDT
By Newsday
Printable version
E-mail this articleAfter Derrick Barrett, 24, spotted an ad for a loan that didn't require credit checks, he checked out the company via the Better Business Bureau and found no complaints.
The Hempstead, N.Y., resident was approved for a $3,000 loan, which he planned to use to pay for college tuition and to buy a car.
Julie Vitrano, 25, who has a 10-month-old son, was having trouble making ends meet. So she applied online for a $5,000 loan.
Barrett and Vitrano turned to separate companies but suffered the same fate: They wired hundreds of dollars in loan fees to Canada, then got the runaround but no money.
The companies had Web sites, toll-free phone numbers and detailed contracts, appearing legitimate enough to persuade Vitrano, a Long Island loan officer, and Barrett, a criminal justice student at Nassau Community College on Long Island.
Barrett said: ``I was just stuck with nothing.''
They join thousands of Americans lured into advance-fee loans, an illegal practice of demanding upfront fees to guarantee loan approval.
``Most of the time, it's not a real company,'' said Roger Bogsted, Nassau County's commissioner of consumer affairs.
Last year, the Federal Trade Commission compiled 13,000 complaints for advance-fee loans and offers for credit-card loss protection, insurance and repair. (The agency doesn't break out advance-fee loans separately.)
Barrett's nightmare began in June, when he applied to Minerva Trust for a loan, and a representative of the company requested four monthly loan payments upfront, a total of $546. Eager to get the loan, Barrett sent a money order.
Later that day, a representative asked for an additional $273, pointing to a section of the contract requiring extra fees for customers with bad credit. Barrett paid the fee, convinced the contract indicated the deal was legitimate.
Two weeks later, after numerous calls to the company, a representative told him Minerva Trust had gone out of business. An employee said he could receive a refund in 30 days or pay the new company $272 to process the loan. He paid the additional amount.
Barrett said he spoke with the representative often, getting promises the money would arrive.
A week later, a representative demanded $950 for a ``border tax.'' Barrett suspected fraud and contacted law enforcement and consumer agencies.
Others had also complained. In early July, the Wisconsin Better Business Bureau issued a national alert, saying Minerva Trust, supposedly based in Wisconsin, gave consumers a fake address, wasn't licensed in the state and had bilked consumers in Texas, New York and Mississippi.
Newsday telephone calls to Minerva Trust reached a nonworking phone number.
Susan Bach, spokeswoman for the Wisconsin BBB, said it's difficult to catch perpetrators because they're often in Canada, and the wired money may be picked up in other countries that require little identification.
Vitrano's problems began after she searched online for ``bad credit personal loans,'' applying at U.S.A. Credit Institution, which approved a $5,000 loan.
But after she paid a fee of $493, she couldn't reach the company. ``Every time I called, a voice mail would come on and say, `Thank you. Goodbye,''' Vitrano said. (Newsday phone calls to the toll-free number received the same response.)
Vitrano reached the company after about three weeks, and a representative demanded more money for insurance.
``I said, `I need a contract so I know it's legitimate.' So they sent me a contract,'' Vitrano said. She paid another $384 but faced trouble reaching them again. A month later someone reassured her the money was on the way. It didn't arrive.
Vitrano discovered she had a lot of company. Rip-off Report.com (ripoffreport.com) listed numerous complaints against the company. Like Barrett and Vitrano, few victims recover money, said Barry Elliott, creator of PhoneBusters, a Canadian consumer complaint center.
``We basically tell them that there's almost no chance that they'll see their money again,'' he said. ``We don't want to create any false hopes for them.''
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