PJCNET

BACKGROUND:

Sometimes people with a poor credit history become almost desperate to obtain credit for what-ever reason and because they are unable to match the criteria demanded by reputable high street banks, building societies or any other well respected lenders, they’re often forced to approach less reputable credit brokers and/or other less respected lenders that might possibly approve them a loan or other credit on much less favourable terms. Unfortunately when people become desperate it also makes them more vulnerable to potential scams.

IN SHORT – DON’T PAY BROKERS FEES UPFRONT FOR A PROMISED LOAN OR CREDIT CARD:

In the case of a loan application, if a credit broker was certainly 100% sure that a client was really about to obtain a loan they’ve just offered, why not take the fee out of the loan itself? In the case of a credit card application, if a credit broker truly believed a client will obtain the credit card they promise, why not charge the broker fee onto the credit card itself as soon as it’s issued?

Well the biggest reason credit brokers demand upfront fees before the product is supplied is because they know many clients often won’t really receive what’s promised or they’ll be offered an absolutely abysmal alternative that they won’t be satisfied with. In fact it’s an extremely common mistake for people to pay a credit broker upfront for what they often claim is a guaranteed loan or credit card, or sometimes they say that it is “accepted in principle” which is definitely NOT a guarantee no matter what they often try to claim. Too many clients listen to the credit broker as when desperate to obtain credit, they tell the client exactly what they want to hear whether it’s likely to be true or not. The credit broker can always find plenty of excuses too for not coming up with the goods, like the information a client gave them wasn’t exactly correct to the finest of details. Even if a client does get offered a loan or credit card as promised, it’s usually at extremely uncompetitive rates from a lender that could have been easily approached directly without paying any expensive broker fees, E.g. Provident Personal Credit who offer doorstep loans at extortionately high rates of APR to people who usually can’t obtain credit from any reputable mainstream lenders like the high street banks and building societies.

If a client refuses to continue an application via a credit broker because the fee is mentioned (this is often only mentioned after spending quite sometime going through the main part of the application process), the credit broker is often very pushy and will sometimes keep calling the client back, but in the case of some of the worst credit brokers, they simply take their broker fees anyway from the clients bank account without the knowledge or consent of the customer – please see the “Scam Example 2″ in the section below for more details of this scam.

SCAM EXAMPLES:

I have always advised people never to risk paying any upfront fees to a credit broker or similar on the promise of obtaining credit as there really are too many ‘dodgy’ brokers out there in my opinion, but the 2nd scam below is more difficult to avoid.

Scam Example 1 – Product supplied not as described (UK):

A friend of mine paid an upfront fee for an apparently guaranteed gold credit card, but he was shocked to be later offered a freely obtainable IDT Prime prepaid Mastercard which ANYONE can obtain instantly over the counter at numerous high street newsagents and similar in the UK without any credit checks what-so-ever. This is because a prepaid Visa or Mastercard is definitely NOT a credit card at all since no money is ever actually ever lent to the card holder. One can only possibly spend up to the balance that’s been topped up onto a prepayment card beforehand and any transactions that would put the balance into debit simply won’t be authorised. Despite this fact, this particular card is advertised as a “Prepaid Credit Card”, although it is at least made clear on IDT’s website how the prepayment card works. The prepayment card happens to be gold in colour, but that’s where any similarity to a genuine gold credit card ends.

Scam Example 2 – Fee taken without knowledge or consent (UK):

Be warned that some credit brokers will try to confuse people to pay them an upfront fee without their knowledge or consent by asking for their bank details as part of a credit application process or so they can apparently pay the loan into that account, so PLEASE BEWARE AND DON’T BE RIPPED OFF!

UPDATE: We have renamed the company name to CompanyX in the detailed example below since the issue is being fully resolved with the organisation in question and we believe this was an isolated issue and it’s therefore not how the company normally works. It is not the intention at PJCNET to upset any company or organisation and we’d much rather resolve any issues instead. Readers can still use this example to watch out for this type of scam or similar from other organisations in future however.

My friend unfortunately has a low credit score and decided to give CompanyX a try as he wanted a loan for a brand new PC. On speaking to them over the phone he first asked them if there was any upfront fees and he was told that there wasn’t. The application process then took about 10 minutes and during the application they required his full bank details which is often expected on any loan application due to credit checks, but on this occasion it was apparently required so they could pay the loan directly into his bank account. At the end of the application he was congratulated that he’d been accepted for the loan. After querying whether the loan was really guaranteed, they told him that he’d in fact been accepted for the loan in principle, but that he’d definitely get the loan as long as he’d answered the questions in the application honestly (please remember that “accepted in principle” is far from a guaranteed acceptance no matter what is claimed). Then he was surprised and totally dismayed to be told that he’d have to pay almost £48 as an upfront fee before they could finish processing his loan application and then apparently arrange for the loan payment to go into his bank account within the week. He obviously queried the upfront fee since he was clearly told that there was no upfront fees before the application started. He decided NOT to go ahead as quite rightfully he didn’t trust the credit broker to come up with the goods, especially since he’d already been lied to about the fee to start with. The credit broker tried every persuasion on the phone to get him to change his mind, but after listening to my advice he was adamant he wouldn’t trust them with any upfront fee and after finishing the conversation he assumed that this was the end of the matter.

I warned my friend to keep an eye on his bank in case they tried to take any money using his card and/or bank details that he’d given, but at first it all seemed okay. My friend however checked his bank just over a week later and to his horror he found that a direct debit had been set-up without his knowledge or consent and CompanyX had already taken almost £48 out of his account without authorisation. My friend also has received no paperwork what-so-ever, no loan offer, nothing. I will say that this is scandalous and disgusting behaviour is in my opinion bordering on the serious criminal offence of fraud and deception as I was there when he spoke over a speaker phone, so I know he refused to progress the application as soon as the fee what mentioned and at no time was setting up any direct debit even mentioned or authorised.

We have visited ConpanyX’s website and they’ve obviously had numerous complaints since they’re offering refunds to people affected within around 4 working days, but this is most likely in an attempt to try and reduce the number of people filing fraudulent claims against this organisation. The thing is many people won’t notice the money has gone from their bank accounts or they won’t want to go through the hassle of attempting to get the money back, especially by approaching their bank / building society as being scammed is quite embarrassing to a lot of people. My friend has now complained to his bank who are claiming the money back using the Direct Debit guarantee, but by rights he should be filing a fraud claim and in my opinion the police should get involved, but filing a fraud claim takes much longer and one can be without the money for ages, I suspect that CompanyX rely on this too to stay in business. It’s been extremely inconvenient for my friend as he’s had to visit his branch who have told him he could still have to wait a few days for his money back while he’s out of pocket and what’s even more scandalous, luckily he visited the branch when he did as CompanyX were apparently about to take even more money out unauthorised for absolutely no service given in return what-so-ever.

I will be making a complaint and will report them to The Office of Fair Trading (OFT) on my friend’s behalf as in my opinion, no company should remain in business operating in this awful fraudulent manner. (Instead being fully resolved with the company itself at the time of writing!)

Since a direct debit was set-up without authorisation, knowledge or consent, and since bank details are required to be given for most loan applications, this is unfortunately a difficult scam to avoid, except to avoid all brokers that aren’t well known. Obviously repeatedly check there’s no upfront fees and make it clear you won’t pay any. If the credit broker does take money without your consent, complain to your bank or building society and either use the direct debit guaranteed to claim your money back or even better file a fraud claim (unfortunately it takes longer, but it’s the best way to help stop rogue organisations from trading).

Please watch this space for a link to an article I’m writing detailing better alternatives to bad credit loans and the credit options that are available…

Legal Disclaimer

This article and any comments are my own personal opinion and shouldn’t be taken as definite fact. It is without prejudice to any licensed credit brokers, Provident Personal Credit or any other organisation. We would welcome a response from any organisation mentioned so it can be printed here, giving an unbiased 2 sided debate. The examples given only show one person’s experience with an organisation and it doesn’t necessary mean this is the similar experience of many of their other customers. There is no official evidence that any organisation has certainly committed fraud and deception as no formal charges have been made. The author of this article is not a financial advisor and is not qualified in this field. Although PJCNET try to make our articles as accurate as possible, we cannot be held liable for any mistakes made. This article, any comments, any other articles or anything else on this website is covered by our full legal disclaimer.

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