There has been an increase in loan scams as people become financially desperate and see a cheap loan as a way out of a financial crisis.
My inbox is flooded each day with companies claiming to offer really cheap loans. Many of these emails are using names of well-known lending companies such as Direct Axis or RCS. This is the modus operandi of loan scamsters. They pretend to be a legitimate lender and even fraudulently use the registration number of legitimate credit providers to appear authentic.
In their email or SMS solicitation they claim to offer blacklisted people loans, and the interest rates offered are ridiculously low. For example, one scam is offering consolidation loans as low as 3.5% per annum. This alone should be a warning sign to any potential borrower.
If someone is prepared to lend you money when other institutions are not, and at an even better rate than a prime customer, you need to be asking some serious questions.
In all loan scams the loan provider asks for an upfront payment in order to release the loan. This is usually for “legal fees”, “insurance” or “bank costs”. Once you have paid, they then ask you to pay another fee you didn’t know about. As you are already down several thousand rand, and now more desperate than ever, you pay the next amount as well. This continues until you realise you have been scammed and they just disappear.
In some cases, victims who have tried to confront the scamsters have been harassed and bullied. Scam artists have even demanded that the victim pay them the value of the full loan even through the victim has never received a cent.
Apart from the ridiculously low interest rates, these scams are very easy to spot because under the National Credit Act no credit provider is allowed to ask for upfront fees. So, if a lender is suddenly asking you for money in order to give you the loan, walk away immediately and report them to the National Credit Regulator.
They may harass you and threaten you with blacklisting – but they cannot do that and it is just a way to intimidate.
If you have already fallen victim, notify your bank. They have a fraud division that cooperates with the other banks. They can take steps to freeze the scamster’s account before the money is withdrawn. Go to the police to open a case and get an affidavit as this will be required by your bank and the regulators.
This article first appeared in City Press.