Consumer Fraud
Rev. June 2024
Pay Day Loans
WHAT IS PREDATORY LENDING?
Predatory lenders are businesses that offer short-term, high interest loans, such as payday loans.
WHY SHOULD I BE CONCERNED?
Payday lending fails to help solve financial problems; ninety-nine percent of payday loans go to repeat borrowers, trapping them in debt.
WHAT CAN I DO INSTEAD OF GETTING A PAYDAY LOAN?
Before you get a payday loan, you should consider the alternatives below if you need cash, or need to pay off a predatory loan:
- Talk to your Command Financial Specialist.
- Visit Fleet and Family Support Centers for private advice.
- Talk to your on-base bank and/or credit unions. They have been
tasked to try to help you. - Navy and Marine Corps Relief Society, NMCRS can provide interest-free loans and grants. Members must not have a pending discharge, bankruptcy or military disciplinary action either pending or within the last six months. For loan application and information on eligibility see http
s://www.nmcrs.org - Military One Source has advice and referrals 24/7. See https://www.militaryonesource.mil com or call (800) 342-9647.
- American Red Cross Armed Forces Emergency Service Center provides 24/7 emergency financial advice and referral. Call (877) 272-7337 or visit https://www.redcross.org/get-help/military-families/hero-care-network.html
HOW DOES FEDERAL LAW PROTECT ME?
The Military Lending Act protects active duty service members and their families. The law limits the annual percentage rate (APR) to 36% on payday loans, vehicle title loans, and tax refund loans, and prohibits a creditor from “rolling-over” or refinancing the same loan between the same creditor and borrower.
Active duty members of the Army, Navy, Marine Corps, Air Force, or Coast Guard, as well as reserve members serving on active duty under a call or order that does not specify a period of 30 days or less, or a member serving on Active Guard duty as that term is defined in 10 U.S.C. § 101(d)(6); an eligible member's spouse or child as defined in 38 U.S.C. § 101(4); or an individual for whom a member has provided more than one-half of the individual’s support for 180 days preceding the extension of credit.
COMMON QUESTIONS
- If I was previously on active duty, but am no longer, am I protected by federal law? No.
- If I am married to an active duty member, but I have my own income, am I protected by federal law? Yes.
- Am I protected with money orders, western union wire transfers, or cashing checks at a payday loan store? No. The law does not apply to these kinds of transactions, even at a payday loan store.
RESOURCES
Federal Trade Commission: www.consumer.ftc.gov/features/feature-0009-military-families
- Consumer Information: www.consumer.ftc.gov; (877) FTC-HELP
- File a Consumer Complaint: https://www.ftc.gov/complaint
Fleet and Family Support Centers: https://ffr.cnic.navy.mil/family-readiness/fleet-and-family-support-program/
Navy and Marine Corps Relief Society:
- Naval Base San Diego: Bldg. 270, 3115 Dolphin Alley, San Diego, CA 92136; (619) 238-1587
- Naval Air Station North Island: Bldg. 318, 318 Saufley St., San Diego, CA 92135; (619) 435-8786
Military One Source: (800) 342-9647; https://www.militaryonesource.mil
Armed Forces Emergency Service Center: (877) 272-7337
American Red Cross Armed Forces Emergency Service Center: (877) 272-7337; www.redcross.org
Joint Task Force on Financial Health Southwest: (619) 556-9353
Military Lending Act, 10 U.S.C. § 987 (2012), as implemented in 32 C.F.R. Part 232 (2013).
Telemarketing Fraud
Telemarketing fraud is on the rise and its effects can be devastating. We are all potential targets because almost everyone has a telephone. But if you can spot the fraud, you can protect yourself and your interests.
How do fraudulent telemarketing operators get my phone number?
Operators may get your phone number from a telephone directory, a mailing list, or a “sucker list.” A “sucker list” contains names, addresses, phone numbers and other information such as how much money an individual has spent on previous telemarketing solicitations. These lists are bought and sold by operators. Another way operators can get your number is through the use of direct mail. A consumer may get a letter or postcard saying that he/she has won a prize or contest and all you have to do is respond with certain information. If you do respond, then the operator has your information and can contact you. The other popular way to get information from a consumer is from the consumers who place a call in response to a television, newspaper, or magazine advertisement.
How do fraudulent telemarketing operators disguise the fraud?
Operators disguise the fraud with offers of prizes, which are worthless or overpriced, travel packages described as free or low-cost but have hidden costs, or “get rich quick” schemes. These “get rich quick” schemes are often disguised as “investment opportunities.” Examples include movies, cable television, Internet gambling, rare coins, and art. Lastly, operators may attempt to defraud you by posing as charitable organizations soliciting contributions. Usually these organizations sound like well-known charitable organizations or law enforcement agencies but they will not send written information about their organization so you can check them out.
If you fall victim to any of these scams, watch out for recovery scams, in which an individual or representative who knows you have fallen victim to a scam promises to get your money back. This is an easy way to lose even more money.
How can you protect yourself?
- Don’t give in to pressure. Don’t make an immediate decision on the phone.
- Don’t give your credit card, checking account, or Social Security number to unknown callers.
- Don’t pay for something just because you will get a “free gift” in return.
- Get all information in writing before you agree to buy something.
- Check out a charity before you give. Ask for written information on the charity and how much of the donation actually goes to the charitable cause and how much goes to the charity’s administration.
- Don’t invest your money with an unknown caller.
- If the offer is an investment, check with your state securities regulator to see if the investment is properly registered.
- Don’t send cash.
- Make sure you know the per-minute charge for any 900
“pay-per- numbercall “900 number calls you make. - Be cautious of statements that you have won a prize, especially if the caller says you must send money to claim the prize.
- Don’t agree to any offer where you have to pay a registration or shipping fee to receive a “prize.”
- Check out unsolicited offers with the Better Business Bureau, local consumer protection agency, or your state’s attorney general’s office before you agree to send money.
- Beware of offers to “help” you recover money you may have lost previously.
- Be wary of callers saying they are law enforcement officers who will help you get your money back for a fee.
- Register for the national “do not call” list to cut down on telemarketing fraud. You can register your phone number at www.donotcall.gov. You can find more information on the California Attorney General’s website at
http://ag.ca.gov/donotcall/faq.php . You may file a complaint athttp://ag.ca.gov/donotcall/dnc_complaint.php . Even more information is available through the California Department of Consumer Affairshttp://www.dca.ca.gov/publications/telemarket.shtml .
Telemarketing Sales Rule ( 16 C.F.R. Part 310)
The Federal Trade Commission’s Telemarketing Sales Rule requires telemarketers to make certain disclosures and prohibits misrepresentations. It gives you the power to stop unwanted telemarketing calls and gives state law enforcement officers the authority to prosecute fraudulent telemarketers who operate across state lines. Telemarketers must tell you it’s a sales call and who’s doing the selling before they make their pitch. Calling times are restricted to the hours between 8 A.M. and 9 P.M. 16 C.F.R. Part 310.
Federal Gambling and Lottery Laws ( 18 U.S.C. §§ 1302, 1084(a))
Federal Gambling and Lottery Laws make it illegal to operate a lottery or gambling business through the mail or over the telephone. 18 U.S.C. §§ 1302, 1084(a) If you receive a telephone call from someone making a pitch about a lottery, don’t fall victim to the fraud.
RESOURCES
Federal Trade Commission: (877) FTC-HELP;
- Consumer Information: www.consumer.ftc.gov; (877) FTC-HELP File a Consumer Complaint: www.ftccomplaintassistant.gov
- Do Not Call Registry: www.donotcall.gov.
Military Consumer: Military Consumer
Home Equity Scams
If you own your own home, you likely receive many offers to loan you money based on the equity you have in your home. Often companies target the elderly, persons with low income, or those with poor credit with offers that sound great, but in reality may cause you to lose your home. Be aware of these practices so that you can spot them before you put your home on the line.
COMMON SCAMS
Equity Stripping: You need money and don't have a big monthly income. However, you do have equity in your home. You could get a loan, but your monthly income won't be able to keep up with the monthly payments. A lender comes along and encourages you to "pad" or inflate your income, maybe "play with the numbers" in order to get your loan approved. Be careful!! The lender may be out to "steal" your equity. He doesn't care whether you keep up the payments or not because if you don't, he will foreclose your home and strip you of the equity you spent years to build. Don't get set up. Don’t sign any papers without first seeking the advice of an attorney.
Balloon Payments: You've fallen behind on your mortgage payments. You're getting letters threatening foreclosure. Another lender comes along and offers to "save" you by refinancing your loan AND lowering your monthly payments. Look carefully!!! The monthly payments may be lower because the lender is offering a loan in which you only pay the interest each month. Then, at the end of the loan term, the entire principal is due in one lump sum called a balloon payment. If you can't make that payment or refinance in a hurry, you could lose your home. Don’t sign any papers without first seeking the advice of an attorney.
Loan Flipping: You're responsible and have owned your home without problems for years. Your interest rate is okay, you make your monthly payments, but you could always use some extra cash. The lender comes along and talks to you about refinancing, about "making your equity work for you." You agree to refinance, and soon the lender is back offering a bigger loan for say, home improvements. If you accept, the lender refinances your loan and lends you additional money. When the lender does this "flip", he charges you high points and may even jack up your interest rate. You now have some extra money -- and a lot more debt stretched out over a longer time. To top it off, the loan will probably have a prepayment penalty, so if you try to pay early or refinance again, you pay a huge penalty.
The end result? The "extra" cash you received is probably far less than the extra fees and points you are being charged and required to pay in the future. You are also paying interest on those fees. Each time you refinance this way, you get deeper and deeper in debt. Soon, you could lose your home. Don’t sign any papers without first seeking the advice of an attorney.
Home Improvement Loan: A contractor offers to do work on your home AND set up the needed financing through his lender. The contractor will then begin work and at some point, ask you to sign a bunch of papers. The papers may even be blank or what they say are "just legal stuff." The contractor tells you he won't finish the work if you don't sign. Later, you realize that what you signed was a home equity loan with high fees and points. On top of that, the work on your home is bad or incomplete and the contractor is nowhere to be found. Don’t sign any papers without first seeking the advice of an attorney.
Credit Insurance Packing: You're about to sign mortgage papers that you can afford when the lender gives you papers to sign that include charges for "credit insurance" or other "benefits" that you did not discuss. The lender may be hoping you don't notice and doesn't offer to explain the terms. If you object you may be told that the loan papers will have to be rewritten (taking several days) or that the company will have to "rethink" your loan. The lender may even tell you that the credit insurance comes with the lender, implying that it is free. It's not. If you sign, you will be buying a product along with your loan that you do not need. Don’t sign any papers without first seeking the advice of an attorney.
Signing Over The Deed: You're having trouble with your mortgage payments when a new lender comes along to save you. They tell you that in order for them to help, you will have to "temporarily" deed your property over to him. DO NOT do this without consulting an attorney. The financing he promised won’t likely come through. Once the lender has the deed, he treats it as his own. He may borrow against it (for his benefit, not yours) or even sell it. Since you don't have the deed, you will not get anything. The lender can treat you like a tenant and your mortgage payments as rent. If your "rent" gets behind, you could be evicted from your own home. Don’t sign any papers without first seeking the advice of an attorney. NEVER SIGN A DEED OVER WITHOUT FIRST SEEKING LEGAL ADVICE.
HOW TO PROTECT YOURSELF
Follow a few simple rules:
- DO NOT agree to a loan if you are going to have trouble with the payments.
- DO NOT EVER sign something you haven't read!
- DO NOT be pressured or agree to things you don't want.
- DO NOT sign away your deed to ANYONE.
- Ask specifically if credit insurance is part of your loan.
- Keep good records of payments, charges, etc.
- Read everything carefully.
- CONSULT WITH AN ATTORNEY BEFORE SIGNING ANY DOCUMENT.
If you don't understand a document, feel pressured, or think you have to deed your home, SEE AN ATTORNEY FIRST. If any person makes promises to you but gets upset when you say you first want to see an attorney then beware, there is a problem. Check the Better Business Bureau to see if the broker or lender has been reported for previous scams. The Federal Trade Commission also lists recent mortgage scams on their website, listed below.
RESOURCES
Federal Trade Commission: (877) FTC-HELP; https://consumer.ftc.gov/articles/how-avoid-home-improvement-scam
Consumer Information: www.consumer.ftc.gov; (877) FTC-HELP
File a Consumer Complaint: https://reportfraud.ftc.gov/
Better Business Bureau: https://www.bbb.org/
Counterfeit Check Scams
ARE YOU BEING SCAMMED?
Scam 1: Nigerian Fraud, also known as Advance Fee Fraud
Scam 2: The scammer uses counterfeit cashier's checks or counterfeit money orders to defraud potential victims. In this fraud, you are selling a relatively expensive item online or in the paper and are approached by a potential buyer, usually from a foreign country, who wants to buy the item and pay with a cashier's check. The buyer will contact you by phone, mail, or email. The buyer will arrange to view the item but suddenly has an emergency and tells you that it will have to be bought without seeing it or that the photo of the item is sufficient. The buyer sends a cashier's check in an amount far exceeding the price agreed upon. The buyer then calls you or sends an email telling you to deposit the original check and wire the difference to a person somewhere else who will arrange for pick-up or delivery of the item being sold. You deposit the check in your personal bank account, withdraw the cash and wire it as directed. The bank will deposit the check and credit your account. You find out later the check was a fake. Your bank then notifies you that you have passed a counterfeit check and are liable for the overage.
Scam 3: You have won a lottery! The scammers usually ask for money and will keep on asking for money. http://www.fraudaid.com/security_products/ Legitimate lotteries, also known as sweepstakes, never ask for money. If you win a legitimate lottery or a sweepstakes, the only money you owe is the tax you personally pay directly to the government. This tax is never paid through or by anyone else. This is true worldwide. The scammers tell you that you must pay money for bank fees, or storage, or shipping, and give you a long list of other false reasons that may actually sound reasonable to an unsuspecting person.
Scam 4: What appears to be lottery money or sweepstakes (free lottery) money is sent to you by check using DHL, UPS, or FedEx, or it is sent in an envelope with NO RETURN ADDRESS! Would you send $3,500 to someone in the form of a cashier’s check and not put your return address on the envelope? No, you wouldn’t, and neither would anyone else who is really sending you $3,500. The checks sent appear to be from a legitimate lottery company and have the lottery company name and address. With all the information being correct, many unsuspecting people assume that it is legitimate.
Beware of notices received in the mail or via email that say "Congratulations, you are a winner!" If you receive what appears to be a cashier’s check or a money order from someone or some business you never heard of, beware. DO NOT CASH THAT CHECK! The check you have received is counterfeit and you are responsible for the entire amount. You are responsible for any money you spend and any money you send to anyone else (the scammers). You could even be arrested and charged with a crime for passing one of these fake checks. See 18 U.S.C. § 1344.
Most people trust cashier's checks are genuine, especially when they appear to be from a reputable bank. Well, sure, the bank is real but the check or money order is NOT REAL. Cashier's checks are generally considered much safer than personal checks because supposedly the funds are guaranteed as sufficient and available. The counterfeits are generally of excellent quality and in fact, some are on paper stolen from the bank or financial institutions. Unfortunately, many times even the bank that you take the cashier’s check to will tell you it is valid, give you funds, but only later discover later that it was counterfeit - after you have passed it and after you have sent those same funds to a third party in the hope of getting a huge payoff in return.
In summary, if you receive an offer in the mail or through the internet, beware. If you pass a counterfeit check or money order, you could be charged with a crime, need to raise bail to get out of jail, hire a criminal defense attorney to defend you, explain the circumstances to your command, and defend your security clearance as you are facing the possibility of being prosecuted. Legal assistance can help you verify whether or not your lucky day is REALLY a lucky day. Remember, if it sounds too good to be true, it probably is.
RESOURCES
Federal Trade Commission:
- Consumer Information: Federal Trade Commission | Protecting America's Consumers (ftc.gov); (877) FTC-HELP
- Military Consumers: Military Consumer Protection | Federal Trade Commission (ftc.gov)
- Federal Trade Commission Consumer Information, Fake Checks, https://consumer.ftc.gov/articles/how-spot-avoid-and-report-fake-check-scams
Federal Law
Federal Counterfeiting and Forgery Crimes, 18 U.S.C. §§ 470–514 (2012)
Federal Fraud Crimes, 18 U.S.C. §§ 1341–1351 (2012)