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Cheap Financing Scams Take Advantage Of People Needing Loans

by Jim ONeil on June 2, 2011

in Personal Finance News

Yet another unfortunate result of the credit crisis has been identified. Disreputable organizations promising cheap financing are conning thousands of people out of money. Within the past year, complaints about such companies have more than doubled.

As the restricted lending continues, those who are desperate for money may fall victim to more of these scammers.

The Office of Fair Trading recently received a super complaint from Citizens Advice about these credit brokering firms. On Wednesday, it will determine whether a formal investigation is warranted. Last week, the Financial Ombudsman Service reported that as of April, the number of calls about credit brokers thus far this year skyrocketed 150 percent to over 5,000.

A credit broker is a middleman who claims to make it easier to find loans. This person usually targets individuals who have trouble getting loans bank issued due to poor credit. Of calls to the ombudsman regarding credit brokers, close to 700 were investigated.

Seventy percent of the time, the ombudsman ruled in the favor of the customer.

Not all credit brokers are scam artists but it is becoming harder to find the legitimate ones. Unscrupulous firms make phone calls and send emails and text messages to consumers, promising cheap loans in exchange for a fee of £50 to £100.

Consumers are asked to provide bank account information up front and even if the loan does not pan out, the fee is deducted from their account.

This is bad enough but may only be the beginning. The organization may pass the information to other firms offering debt management services or payment protection insurance. What starts the loss of a small amount of money can quickly escalate.

Consumers should be wary of these brokers, shop around for credit, and never pay any money up front or provide account details to a cold caller.

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