Lender Impersonation and Advanced Fee Scams
Scammers use fake names and subtle changes to website addresses. Posing as a lender is often part of Advance Fee Scams promising a large loan, in return for an up-front fee (a well-known non-lending version of the Advance-Fee Scam is the “Nigerian Prince” scam).
These thieves can pose as anyone or any company. We are a local private lender and provide loans secured by property in Colorado’s Denver, Boulder, Fort Collins, And Colorado Springs Metro Areas. However, with these types of scams, thieves may pretend to be from small private lenders like us or from the biggest banks.
A Real-Life Story:
- A prospective borrower contacted me about a $4MM loan offer he received (supposedly from a “lender” whose name was almost identical to ours, except for one space and the letter ‘s’).
- The website address was almost identical, except for the slight name difference (just that missing “s” in the website address – Real is GoodFundsLending.com).
- My company, Good Funds Lending, LLC, had NOT offered the loan.
- The suspicious offer was even signed by the “CEO” who had LinkedIn account indicating he had a Harvard education and lots of connections. (As of writing this, I no longer see his profile on LinkedIn; But I have seen an offer now from that same company but with a female CEO who I did not find on Linkedin).
- The ‘loan offer’ required a $30,000 wire payment prior to releasing the first $3MM in loan funds (“fee to clear”).
- **My company has NEVER required such a fee. I can’t see why a borrower would ever do that (Even if a lender escrows borrower funds, it would be a different process, but borrowers should be extremely careful and skeptical when being asked for large amounts of money, especially if prior to loan funds being sent from the Lender).
- I wondered if the other “lender” was legitimate with a similar name in another state. However, the large advance borrower payment to release funds made it clear that legitimacy was unlikely (likely advanced fee scam). RED FLAG!
- The “lender” provided documentation indicating the lender’s office was in California. The California Secretary of State did not show the company as registered. RED FLAG!
- Instructions were to wire the “fee to clear” to a bank account with another company as the account holder. RED FLAG!
- That company to receive the fee was registered in another state. RED FLAG!
- And that company to receive the fee had information on the internet that made it appear very suspect. RED FLAG!
- I reported the “loan offer” to authorities (more details at the bottom). SMALL EFFORTS CAN IMPROVE FOR THINGS FOR OTHERS!
Why do the scammers do it??
Stealing a large fee from the borrower may often be the sole aim. This is the Advanced Fee Scam(see below for more info).
Fake lenders can also use this technique to get information for identity theft, by obtaining personal information from applications, etc. This is essentially classic Phishing (see below for more info).
How to avoid
- Meet with the lender representative in person. In-person meetings mean the scammers (or agents) must be physically present which often they would prefer to avoid or simply can’t do because they are not in the state or the USA. Additionally, often scammers want to stay far away from personal meetings where his/her picture could be taken. Real private hard money lenders usually (in my experience) want to meet the borrower and see the properties in person to understand the property/project and confirm the borrower is legitimate and likely to succeed. This also gives you a chance to speak with and get a sense of the character of the lender or their representative.
- Be very skeptical and cautious of unsolicited email offers, action demands, or information requests, even when they come from banks or other companies you know or have a relationship with. Often the scam emails will look as those they are legitimate and from a source you know. Scammers may indicate there is a problem with an invoice, a need for updated payment information, to contact them because someone has used your account or your account has been locked out, or that they are offering free things or you something you want, like a loan.
- Check for misspellings or slight changes of lender names and website and email addresses. Is the name singular where it should be plural? Has an extra word like ‘of’ been added? Call the phone number listed on the website of the company. Independently find the website and don’t just rely on emailed links or phone numbers.
- DON’T make big up-front payments (“up-front” meaning paid before the loan funds are wired from the lender). We currently don’t charge any application fees, nor do we charge any other upfront fees. Any upfront fees totaling more than $200, should be a huge warning sign. Scammers may charge large application fees or after a loan has been “approved” charge some sort of “release fee” or require a deposit. Currently, we only charge lender fees if we make the loan, so we are not receiving compensation unless the loan is originated, and we send the loan funds (typically to a title company chosen by the borrower or seller). Some legitimate private lenders may have a small fee to cover expenses like credit checks and labor related to evaluating the application and loan. We are currently considering charging a small fee ($100) for loans secured by commercial or industrial property since such properties require much more time to evaluate compared to investment residential properties.
- Verify the company is registered with the secretary of state where they represent they operate. Does the BBB has the same contact information that you have (including phone domain/website?. This is different than verifying NMLS registration as that has its own issues discussed below. Check that the business is registered with the secretary of state (or other government agency responsible for tracking registrations of businesses in the state). Often scammers don’t register their fake company because it involves a credit card transaction that can be traced back to an individual. This is not foolproof, as a scammer could pretend to be someone else (but more effective when used with calling the company at a phone number on the website and verified as listed on the BBB or other trusted agency website).
- Check that the Lender makes loans. This is easy. You can ask the title company you have chosen, if the lender has made loans or check for public records of mortgages or deeds of trust (pay attention to subtle spelling differences or name changes). In Colorado, you can often check online with a county clerk and recorder. Keep in mind that some lenders and brokers use a different name when recording public documents. The Secretary of State (or other state authority) tracks registered tradenames(aka DBAs or aliases) associated with a registered business.
- Check references other than those supplied by the lender. If the buyer or seller chose the title company, you can ask the title company if they have worked with the lender before and if the contact information matches. If you ask the lender, scammers could provide phone or email information to someone they are working with to scam you. If you don’t know anyone personally, you can often find borrowers listed in the recorded deeds of trusts or mortgage documents and contact them. Often an LLC will be the borrower, but the person signing for the borrower will be a member of BiggerPockets.com or LinkedIn.com, etc. Contacting borrowers has other benefits as well. You can learn how the lender treated the borrowers, etc.
- Verify the Lender’s address. If the Lender uses a virtual office, you can verify who holds the virtual office with the virtual office company and check the principal office address listed with the state is connected with the person or company you are speaking with.
- Lock/Freeze your credit to lower the risk of someone opening accounts in your name (FTC info on credit freezes https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs). This means when you do want to get credit you may need to temporarily unlock your credit.
The above steps don’t provide guarantees and are not comprehensive or exhaustive, but collectively they can substantially lessen risk.
NMLS required?? (No, see why)
Someone recommended check the NMLS registration, but this is problematic for several reasons. First, nothing stops scammers from pretending to be someone else (including his/her name and NMLS #) in an email. Many true private lenders do not have NMLS #, and they are not required to be licensed if they aren’t providing consumer loans. If they have NMLS # there is a good chance that they are a broker or “fund lender with multiple limited partners”, and you may pay more than you would with a true private local private lender.
Report crimes and attempted crimes…
If victims do not say anything, things are unlikely to change. You can make the world a little better and a little safer. Report the scams to FBI and state authorities (often the attorney general of the state). In the true story above, I reported the scam to the FBI by website after initially calling (FBI Internet Crimes Communication https://www.ic3.gov/) and the California Attorney General. Good Funds Lending, LLC only operates in Colorado. The “loan offer” indicated the other company was in California (per above).
More on Advanced Fee Scams, Phishing, and Related Scams
“An advance-fee scam is a form of fraud and one of the most common types of confidence tricks. The scam typically involves promising the victim a significant share of a large sum of money, in return for a small up-front payment, which the fraudster claims will be used to obtain the large sum. If a victim makes the payment, the fraudster either invents a series of further fees for the victim or simply disappears… variants have involved mention of a Nigerian prince or other member of a royal family seeking to transfer large sums of money out of the country—thus, these scams are sometimes called “Nigerian Prince emails” [footnotes not shown] (https://en.wikipedia.org/wiki/Advance-fee_scam viewed on April 23, 2021).
“Phishing is the fraudulent attempt to obtain sensitive information or data, such as usernames, passwords, credit card numbers, or other sensitive details by impersonating oneself as a trustworthy entity in a digital communication. Typically carried out by email spoofing, instant messaging, and text messaging, phishing often directs users to enter personal information at a fake website which matches the look and feel of the legitimate site.” [footnotes not shown] (https://en.wikipedia.org/wiki/Phishing viewed on April 23, 2021).
The FBI reported it “received 467,361 complaints in 2019…and recorded more than $3.5 billion in losses…” related to internet-enabled crimes and scams (FBI website viewed on April 23, 2021)
IMPORTANT INFORMATION AND DISCLAIMER:
The information contained above is not comprehensive nor exhaustive and may be flawed personal opinion. You should verify, research, and check with an expert (at your own expense) prior to acting. I am not an attorney, nor a legal expert and you should not rely on the information provided. The information provided may be incomplete, insufficient, inappropriate, inaccurate, or otherwise unsuitable.