Consumer Protection

How to Protect Yourself: Advance Fee Loans

Source: The Florida Attorney General's Office

Generally, consumers seek loans from banks, credit unions and other financial institutions. However, if you have bad credit or credit problems, it is unlikely that you will qualify for a loan from these institutions. Many companies will advertise they can guarantee their ability to get loans for people with credit problems, but will require advance fees. These loan brokers may seem like a good alternative source of funds, but consumers should be aware that many of these companies are nothing more than scams.

If you are deciding whether to apply for a loan with an advance fee loan broker, please consider the following:

There are no guarantees in the legitimate loan industry.

Legitimate credit grantors will not guarantee that you will qualify for a loan. Banks and other financial institutions simply will not risk approving your loan without extensively researching your credit history and likelihood of being able to repay the debt. You should be wary of any loan broker who tells you that the lender can make such a decision by reviewing information you provide over the phone.

Question what the fee is for.

Legitimate companies typically charge a fee to process your application and apply the fee to cover the costs of researching your creditworthiness. These may be charged up front or added to your first month’s payment. Advance fee loan schemes claim that payment of the fee will “lock you into the loan” so you will not lose out to others competing for loans. Such hard sell tactics should be a red flag and keep you from doing any further business with the loan broker, especially if the company encourages you to send the money that day and is willing to pay for an overnight mail company pick-up at your home or office.

Get your agreement in writing.

If the lender is assessing a fee, ask the lender to detail in writing specifically why the fee is being assessed. What service is the lender or broker claiming to provide in exchange for the funds? Additionally, ensure that any repayment terms the lender has promised appear in any written contract you sign. Understand what you must pay at signing, the interest rate on your loan, when payments must be paid and how much you will pay over the life of the loan.

In many states these businesses are illegal.

Over the past few years, many states have enacted legislation prohibiting loan brokers from charging an advance fee. In Florida, assessing or collecting such a fee is a felony. There are some businesses such as banks and credit unions which are exempt from this prohibition. Ask the lender if they are a licensed financial services provider in Florida. Contact the Florida Office of Financial Regulation (OFR) at (850) 487-9687 or to determine if the company you are dealing with is acting legally and verify the lender license. In other states, you may want to contact consumer agencies such as the Attorney General's Office and local consumer agencies in the county where the company is located to determine if there are complaints or legal actions pending against the company. Do not rely solely on Chambers of Commerce or other such business associations where membership is based on payment of a fee.

File a complaint.

If you believe you are the victim of an advance fee loan scam, file a complaint against the lender with the OFR at or (850) 487-9687. Additionally, you may file a complaint with the Attorney General’s Office online at or by phone at 1-866-9-NO-SCAM. You may also wish to file a complaint with the Consumer Finance Protection Bureau (CFPB), a federal agency tasked with reviewing consumer complaints about consumer financial products and services. File a complaint with the CFPB online at or call toll-free at 1-855-411-2372.

You may also file a complaint with the Florida Department of Agriculture and Consumer Services, which acts as the State's consumer complaint clearinghouse, at