FTC, States, Canada Crack Down on Advance-Fee Lenders

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The Federal Trade Commission, several state agencies and Canadian authorities yesterday said they took legal action against companies and individuals who charge an up-front fee for loans and credit cards that are never provided.


Operation Advance Fee Loan 2000 resulted in five cases filed by the FTC, 13 by states and three by Canadian authorities, according to the FTC.


The marketers allegedly used telemarketing, direct mail, print ads and direct response TV to offer consumers guaranteed loans regardless of their credit history in exchange for an up-front fee of $45 to $149 or more. In many cases the loans were never granted or the consumers were simply sent loan or credit card applications, the FTC said. In some cases, the accused were also charged with misrepresenting that the advance fees were refundable.


Most of the accused individuals and companies were charged with violations of the FTC Act and the Telemarketing Sales Rule, which prohibits telemarketers from collecting any fees when guaranteeing consumers a loan or credit until they actually receive the loan or credit.


Consumer Sentinel, a multi-agency investigative tool, recorded about 4,200 consumer complaints about advance-fee loans since September 1999, the FTC said.

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