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Wednesday 4 November 2015

15-323MR ASIC repeats warning to Australian borrowers about lending scams

ASIC is warning Australians about scammers asking consumers to make upfront payments for loans that are never provided. This new warning comes on the back of an increased number of recent reports from victims who have lost thousands of dollars from these scams.  

The scammers appear to be operating from overseas, and have impersonated genuine Australian companies and Australian Credit Licence holders.  After making a loan enquiry online, the victims generally receive a telephone call or email from the scammers advising them that they qualify for a loan, sometimes for a larger amount than they originally applied for. 

Victims are provided with fake loan contracts that look like legitimate contracts, and are often misled by the use of an Australian credit licence number or Australian Company Number belonging to genuine businesses that have no connection to the scam. The scammers also use re-routed Australian phone numbers to create the impression that they are located in Australia.

The scammers then tell the victims that they must pay insurance or fees for the loan before the loan can be provided, usually to Australian bank accounts set up for the purpose of receiving these payments. The deposits requested are often in the thousands, and can be as high as $5400 per consumer. However, after victims make these payments, they never receive the loan.

Legitimate lenders who are authorised under the credit laws in Australia will generally not request that any fees be paid upfront as these establishment costs are usually included in the loan and repaid over time.

"If you are asked to contribute fees or insurance costs before you are advanced any money under the loan, you should treat the proposed transaction with a great deal of suspicion. This is a classic warning sign of a scam", said ASIC Deputy Chairman Peter Kell.

"Consumers should always take steps to make sure they are dealing with a legitimate business by only dealing with those they can reach through publicly available contact details, rather than accepting unsolicited offers of credit from lenders."

Consumers should also be aware that they put themselves at risk of potential identity theft by giving out personal information (like copies of identification documents) to parties they don’t know or can't contact through publicly available contact details.

As the scammers are usually operating overseas, ASIC is generally unable to pursue this type of matter. If you are suffering financial hardship, consider contacting a financial counsellor for help with your debts.  They offer a free service, and can be contacted via 1800 007 007.

Practical online scam prevention tips

  • Only deal with reputable online institutions
  • Do your background checks, but be aware that scammers can pretend to be a licensed credit provider located in Australia.
  • Be very suspicious of any requests for upfront payment, even if making a deposit into an Australian bank account.

Always check that the business you are dealing with is readily listed in the public domain. If there is anything you are unsure about, call the Australian Securities and Investments Commission (ASIC) on 1300 300 630.

ASIC's MoneySmart website has more tips on how to recognise a loan scam.

ASIC has previously issued warnings about fake loan scams in 11-178AD and 14-040MR.