Financial scams and how to spot them
Getting a loan can be a useful go-to when you need access to cash, fast. Personal loans can be easy to apply for and you can receive them quickly. The application process is usually very simple, and responsible lenders will clearly outline the costs and repayment process after they’ve conducted a proper assessment to make sure that you can afford the loan you’ve applied for without getting into financial difficulty.
Sounds quite straight forward, right? Well, yes, it is… but there are some things to look out for. This includes loan scams. Unfortunately, there are loan scams out there, and they can trap people who are unaware that that they exist.
Nevertheless, there are several tell-tale signs that can help you identify a loan scammer from a legitimate lender. In this blog, we will outline the most significant indicators of a loan scam. This way you will be equipped with a set of tools that will help you to prevent being tricked in the future.
8 warning signs of a loan scam
- They will contact you first – Probably the most obvious indicator of a loan scam is that they will contact you first, and out of the blue, without having been referred to you by someone like us. Unless you have contacted a loan provider, and made an application or an inquiry for a personal loan, you shouldn’t be contacted.
Getting contacted randomly, saying that you are eligible for a loan, is big red flag for a loan scam! They may either call, sms or email you, and they may seem friendly and nice. The offer may seem too good to be true – that is because it is! There are clear warning signs for a loan scam.
- They don’t have legitimate contact details – if the lender contacts you with an email address that does not have a legitimate domain attached to it, it could be a clear warning sign. If you are emailed on a Hotmail, gmail or yahoo account instead of legitimate company email, it is worth thinking twice about whether the company is legitimate or not.
Another indicator could be that the email address is spelt incorrectly, for example instead of email@example.com it is firstname.lastname@example.org – if you know the brand, check the spelling. In addition, you should check if they have a clearly displayed ABN and Australian Credit Licence. If they don’t have either it means they are not legally registered as an Australian business or credit provider and you should run for the hills.
- They will ask you to pay money before you receive the loan – if you are asked to pay money upfront before you receive the loan and it is not an establishment fee – it is not a good sign. Legitimate lenders will give you a contract that you will have to sign, which outlines all the terms and conditions attached to the loan. This will include all the costs associated with the loan. You will also receive your money before you must make any payments. So, if you are asked to pay money up front by a loan provider – don’t do it! It is likely to be a scam.
- They lend you more than you can afford – responsible lenders are legally required to check your payment history, to ensure that you will be able to afford to repay the loan. This includes looking at your recent bank statements or payslips to verify that you have been receiving a regular income.
They may also perform a credit check, depending how much you want to borrow. This is because lenders want to make sure that will be able to repay the loan. They have an obligation to try and help you, and not get you into debt that you cannot handle. That’s the importance of carrying out thorough checks of your payment history. If a lender does not perform these reference checks on you, and approves you for a loan that is more than you can afford, this is another indicator.
It would be best to walk away from this offer; however desperate you may be.
- They offer you very low interest rates – loan scams might try to entice you very low interest rates. Whilst this may seem attractive, it is more than likely that it is too good to be true.
- They aren’t registered – For credit providers to operate legally within Australia, they must have to comply with several rules and must be registered. the Australian Securities and Investments Commission (ASIC), have a professional register where you can search a credit provider to check that they are registered and legitimate. If they are not registered it means they are operating illegally.
You can find the register here: https://connectonline.asic.gov.au/RegistrySearch/faces/landing/ProfessionalRegisters.jspx?_adf.ctrl-state=p2sqc3cmz_4
- They pressure to decide quickly – if a loan provider is pressuring you to decide quickly, this could be an indication of a personal loan scam. By pushing you to act quickly, you may make a snap a judgement without thinking everything through. A loan scam would probably try to do this to by preventing you from taking the time to consider about all the details, and have time to identify them as illegitimate. This may involve pressuring you to give your personal details
- They ask for personal information – another indicator is that they will pressure you to provide financial information such as bank account details, credit card information or personal information. Never give this information if you uncertain about who you are dealing with.
List of companies that you shouldn’t deal with!
ASIC has a list of companies that have been identified as scams. Here is a where you can find a list of them: https://www.moneysmart.gov.au/scams/companies-you-should-not-deal-with
Other types of scams to watch out for….
Unfortunately, loan scams are not the only types of scams out there. There is a whole variety of different ways you can be scammed. Don’t worry, we’ve put together a list of them. This means that not only will you be fully aware of how to identify loan scams, you’ll be prepared if you come across any type of scam that tries to cheat you.
You’ve won money! – this is when you receive a notification that you’ve won money of some sort. The likelihood is you haven’t even bought a lottery ticket, but you’ve been told that you’re a winner. They might tell you that you’ve won money, a holiday or even an electronic device. Don’t be duped by this trickery. If you haven’t entered a competition, it’s impossible to win it. This goes back to the idea that if it sounds too good to be true, it probably is.
Fake charities – this is really dodgy. You may get scammers impersonating or making up charities and asking for donations to support a ‘worthy cause’. This can be a tricky one, because legitimate charities do contact you out the blue, asking for donations. There are various ways that fake charities can present themselves. They can approach you on the street, or come to your door. They can even set up fake websites.
There are some warning signs that can help you identify a fake charity from a real charity.
- It’s a charity you have never heard of before
- The person collecting donations does not have any identification
- Make you feel guilty if you don’t want to give money
- Will only accept cash payments
- Don’t give you a receipt
- Try to pressure you into donating on the spot
- Try to get your bank details
Buying or selling products – there are some scammers that try and trick people by posing as fake businesses. They could come in the form of online stores, and advertise good deals on products. They can make fake websites that look almost legitimate by using logos and stealing ABNs. One way to identify this type of scam is if the products are advertised at very low prices – again something that seems too good to be true.
Another strong warning sign, is that they don’t provide the same amount of information that a normal lender does in terms of details about privacy, terms and conditions or contact information. They may not even allow payment through a secure payment service such as pay pal.
Money making scams – there are some money-making scams out there that try and entice individuals with get rich quick schemes. These can come in various forms such as betting scams, pyramid schemes, investments schemes and job scams. These scams offer the incentive of making money – but often require an initial financial investment.
For instance, with job schemes they might advertise doing a job that requires little effort but offers high returns. Though to do the job they might ask you to purchase a starter pack. This may not contain what the pack initially promised. Again, this is an example of when you need to be aware of something that sounds too good to be true. These sorts of scams come in the form of an advertisement, email or phone call, often out of the blue.
Attempts to gain personal information – these types of scams are ludicrous as they true to steal your personal details, which is most of with the purpose of gaining access to your finances. Such scams try and get information such as your bank details, your password or credit card numbers.
These scammers might try and do this by posing as legitimate businesses such as banks, utility providers and tell you a lie such as there has been some strange activity on your account. The purpose of telling you this is to make you panic, so you don’t think rationally and hand over your details in a state of fear.
Threats – Another way that scammers might try and steal personal information is through threats to security. For instance, you may be contacted saying that your computer is under risk of a virus and you need to immediately download some anti-virus software. This could come in the form of an email or pop-up notification when visiting certain sites.
This type of scam aims for you to download some type of software that is supposed to protect your computer, whereas instead, it allows scammers to access files on your computer or watch what you are doing. They may use this information to make financial transaction using your financial details or they might take out loans or open accounts under your name.
Dating and romance – Finally, another type of scam that some people can get tricked with is dating scams. This occurs on dating websites where people create fake profiles or fake identities. They might talk to you and even lead you to think you are developing a connection, by talking about emotions and feelings. This is what is known as ‘catfishing’.
These scams can get bad if the person with the fake identity asks you to send them money, once they have led you to believe you can trust them, and even after you have begun to develop strong feelings for them. They might ask you to send them money for gifts or to help them pay for bills or travel expenses.
They may even ask you to give them your credit card details. It’s important not to fall into this trap, because not only can your finances get damaged, but so can your feelings and self-esteem. Online dating is a modern way of meeting people, but to avoid falling into this trap only talk to them online for a short amount of time and then meet them in person (in a safe public place) so that you know they are legitimate.
If you want to find out more about the different types of scams out there visit: https://www.scamwatch.gov.au/types-of-scams
What to do if you’ve been scammed?
So, what if you have encountered a scam? The first thing to do is to stop dealing with the scammer. Don’t contact them and stop responding to any emails or answering any phone calls from them. In addition, file a police report at your local police department as well as report the scam to Australian Securities and Investments Commission. Warn anyone you know about what has happened to you, so that they don’t get tricked by the same thing.
How do you report a scam?
To report a scam, you can visit the Australian Competition and Consumer Commission (ACCC) website, where they have a form you can complete about the scam you have encountered. It may be able to help you get back any money you may have lost, and may help being able to track down the scammer.
Fill out the report a scam report here: https://www.scamwatch.gov.au/report-a-scam