There has been an increase in loan scams as people become financially desperate and see a cheap loan as a way out of a financial crisis.
Even my inbox is flooded each day with companies claiming to offer really cheap loans. Many of these emails are use names of well-known finance companies. They pretend to be a legitimate lender and even fraudulently use the registration number of legitimate credit providers to appear authentic.
In their email or SMS they claim to offer blacklisted people loans and the interest rates offered are ridiculously low. They offer consolidation loans as low as 3.5% per annum. This alone should be a warning sign to any potential borrower.
The scam works by getting you to pay them money. In all the scams the loan provider asks for an upfront payment to release the loan. They tell you it is for “legal fees”, “insurance” or “bank costs”. Once you have paid, they then ask you to pay another fee you didn’t know about. As you are already down several thousand rand, and now more desperate than ever, you pay the next amount as well. This continues until you realise you have been scammed and they just disappear.
In some cases, victims who have tried to confront them have been harassed and bullied. Scam artists have even demanded that the victim pay them the value of the full loan even through the victim has never received a cent. They even threaten blacklisting – but they cannot do that and it is just a way to intimidate.
Apart from the ridiculously low interest rates, these scams are very easy to spot because under the National Credit Act no credit provider is allowed to ask for upfront fees. So, if a lender is suddenly asking you for money upfront – walk away immediately and report them to the National Credit Regulator.
If you have already fallen victim, notify your bank. They have a fraud division that cooperates with the other banks. They can take steps to freeze the scamsters’ account before the money is withdrawn. Go to the police to open a case and get an affidavit. This may be required by your bank and the regulators.
Be vigilant, use common sense and remember, if it is too good to be true, you are about to be scammed.
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