Loans

Advance Fee

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 traditional institutions. Some companies will advertise that 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 payment 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. Some businesses, such as banks and credit unions, 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 flofr.com 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 www.flofr.com or (850) 487-9687. Additionally, you may file a complaint with the Attorney General’s Office online at MyFloridaLegal.com or by phone at 1(866) 9NO-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 ConsumerFinance.gov 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 FloridaConsumerHelp.com.

Cosigning a Loan

Before you decide to cosign a loan with someone, make certain that you understand exactly what cosigning a loan involves and what your obligations will be. Be sure you can afford to make payments if the person you have cosigned for defaults, and that you want to accept this responsibility. Consider these suggestions:

The Federal Trade Commission (FTC) dictates what information creditors are required to provide potential cosigners.

Under the FTC rule, 16 CFR s.444.3, creditors are required to give a cosigner a notice that explains what his or her obligations would be. The cosigner’s notice states that the cosigner is being asked to guarantee this debt; may have to pay up to the full amount of the debt if the borrower does not pay; and may also have to pay late fees or collection costs.

It also states the creditor can collect this debt from the cosigner without first trying to collect it from the borrower and the creditor can use the same collection methods against the cosigner that can be used against the borrower, such as a lawsuit, garnished wages, etc. If the debt is ever in default, that fact may become a part of the cosigner’s credit record. This notice is not the contract that makes you liable for the debt.

Cosigners often are required to pay.

You, as a cosigner, are being asked to guarantee someone else’s debt. The lender would not require a cosigner if the borrower met the criteria for the loan. If the borrower misses a single payment, the lender can collect from you immediately. Also, the amount you pay may be increased by adding late fees, not to mention court costs and attorney's fees if the lender decides to sue to collect. If the lender wins the case, your wages and property may be garnished or taken.

Consider all factors if you decide to cosign.

If you decide to cosign despite the many risks, remember to carefully consider all factors. Be sure you can afford to pay the loan – you should keep in mind that you are obligating yourself to the loan, which may prevent you from obtaining other credit you may want. Do not pledge property to secure the loan unless you fully understand the consequences. If the borrower defaults, you could lose your property. You may also want to ask the lender to limit your liability upon default. For example, the lender could include a statement in the contract that “the cosigner will be responsible only for the principal balance on the loan at the time of default.” You could ask the lender to notify you, in writing, if the borrower misses a payment. Last, make sure you get copies of all documents related to the loan. The lender is not required to give them to you, and if the lender does not provide them, ask the borrower to make you a copy of the documents.

Seek additional information.

The Florida Office of Financial Regulation provides regulatory oversight for Florida’s financial services providers. For more information, visit flofr.com or call (850) 487-9687. Additionally, the Florida Department of Financial Services Division of Consumer Services offers a variety of resources on financial topics. For more information, visit MyFloridaCFO.com/division/consumers/ or call the Department of Financial Services’ consumer helpline toll-free at 1(877) MY-FL-CFO.

File a complaint.

If you wish to file a complaint against a bank or lender, you may do so by contacting the OFR at flofr.com or (850) 487-9687. Additionally, you may file a complaint with the Attorney General’s Office online at MyFloridaLegal.com or by phone at 1(866) 9NO-SCAM. You may also wish to file a complaint with the Consumer Finance Protection Bureau, a federal agency tasked with reviewing consumer complaints about consumer financial products and services. File a complaint with the CFPB online at ConsumerFinance.gov or call toll-free at 1(855) 411-2372.

The Cooling-Off Rule

There are some occasions where the law allows you to change your mind after you have made a purchase and cancelled the transaction. Not all types of sales are subject to the “cooling-off” rule, and the best way to protect yourself is to take time when you are making a purchase to make sure you really want the item or services. If you do find yourself in a situation where you want to cancel, please consider the following:

Know whether your purchase is subject to the cooling-off rule.

In Florida, if you contract for services to be rendered in the future on a continuing basis, you are entitled to a three-day cooling-off period. You are also entitled to cancel a contract for future services if you can no longer physically receive the services, or the services are no longer available as originally offered.

Likewise, if you purchase goods or services during the course of a "home solicitation sale," you maintain a three-day right to cancel. A sale is considered a “home solicitation sale” if it takes place in your home, or at a location which is not the main or permanent place of business for the seller, so long as the purchase price is more than $25.

There are certain exceptions to these general rules. If you are in doubt as to whether you have the right to cancel, you should contact consumer agencies such as the Attorney General’s Office at 1(866) 9NO-SCAM or the Florida Department of Agriculture and Consumer Services at 1(800) HELP-FLA.

Your cancellation rights must be provided to you in writing.

The law requires both a seller of future consumer services and a home solicitation seller to provide written notice of a buyer’s cancellation rights at the time of the sale. In the case of a sale of future services, the consumer’s notice of cancellation rights must appear immediately next to the space for the buyer’s signature on the contract. Every home solicitation seller is also required to provide a written contract to the buyer which includes an explanation of the buyer’s right to cancel.

Know how to cancel your contract.

A sale for future services can be cancelled by the buyer by notifying the seller within three business days from the date the buyer signs the contract. There is no requirement that the notice be made in writing. However, it is a better practice for the buyer to send written notice to the seller by certified mail. Refunds for cancelled contracts for future services must be received within 20 days after the seller receives the notice of cancellation.

Cancellation of a home solicitation sale must be made in writing to the seller by no later than midnight of the third business day after the day the buyer signed the contract. A written notice sent by mail must be postmarked by no later than midnight of the third business day after the contract date. In the case of a home solicitation sale, a refund must be mailed within 10 days after the sale has been cancelled.

File a complaint.

If you wish to file a complaint against a seller, contact the Florida Department of Agriculture and Consumer Services online at fdacs.gov/ConsumerServices or by phone at 1 (800) HELP-FLA. Additionally, you may file a complaint with the Attorney General’s Office online at MyFloridaLegal.com or by phone at 1 (866) 9NO-SCAM. You may also wish to file a complaint with the Federal Trade Commission online using their complaint assistant portal at FTC.gov/complaint as well as with the Better Business Bureau at bbb.org.