Loan fraud

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Credit Card Fraud

Credit card fraud is one of the most common types of loan fraud that identity thieves commit. After stealing your identifying information, a thief applies for a credit card in your name or commits any number of other credit card scams. Once it’s approved, the scammer can rack up debt and leave you responsible for paying back the loan. Credit card fraud can happen in a number of ways: 
  • Stolen or lost cards. One of the dangers of having too many credit cards is that thieves have more opportunities to get access to your account numbers. Stolen wallets and mail fraud are also common ways that scammers get access to your credit cards. 
  • Account takeovers. A scammer can contact your card issuer and use your stolen personal information to change PINs, passwords, and your mailing address, giving them full access to your credit.
  • Cloned cards. Some scammers install devices called “skimmers” that fit over card readers and steal your account information when you use them.  
  • Card-not-present theft. Identity thieves can buy credit card numbers off the Dark Web for as little as $150 and use them to make thousands in online purchases. 
The good news is that credit card providers are very familiar with fraud. Almost every provider offers some sort of fraud protection. And even if your card does get stolen, you may only be liable for up to $50 by federal law — if you report it within two days of learning it’s lost or stolen. 

Be suspicious of any strange activity on your accounts or if your credit score suddenly decreases.

Car Loan Fraud

  • Car loan fraud follows the same basic principles as credit card identity theft. But instead of applying for a credit card, the thief applies for a car loan.
  • Car loan fraud can be particularly damaging since the loans are typically larger than those available for a credit card. Unfortunately, with the rise of online-only car shopping, it’s easier for fraudsters to use your identity to apply for loans. 
  • If you start to get messages about a car loan you didn’t take out or are contacted by a dealership you don’t know, you could be the victim of car loan fraud. 

Advance-Fee Loan Scams

  • Unlike identity theft-based loan fraud, an advance-fee loan scam doesn’t involve a real loan at all — only the promise of one.
  • Let’s say you need to borrow money for essential car repairs or to keep up with your mortgage payments. A scammer will pose as a lender and promise to get you what you need, usually no matter what your credit history looks like. The only catch is that it requires an upfront processing fee. 
  • But once you pay the fee, you’ll never hear back from the “lender.” It was all a ruse to get you to pay a processing fee for a loan that never existed.
  • Beware of lenders who don’t check your credit or who say it doesn’t matter. You can learn more about how to protect yourself from no-credit-check scams from the FTC.

Home Loan (Mortgage) Fraud

Mortgage fraud is another common and devastating form of loan fraud.
  • If an identity thief has enough of your personal information — such as your tax return and Social Security number — they can apply for mortgages in your name.
  • A thief can even falsify property ownership (i.e., deed fraud) and “sell” your home to an unsuspecting buyer. Or, they might apply for a reverse mortgage and steal the equity in your home.
  • Another type of fraud is taking part in a mortgage or real estate scam. This is where a fraudulent buyer, homeowner, and appraiser work together to apply for an overpriced mortgage loan, then split the proceeds.
  • The victim — a so-called “straw borrower” — is an innocent person with good credit who’s tricked into believing the real estate scheme is an investment. Because the mortgage is overpriced, the straw borrower can’t pay it off even if the house goes into foreclosure.

Business Loan Fraud

  • Fraudsters can give false information to apply for small business loan programs from private lenders including banks or agencies such as the Small Business Administration (SBA).
  • Someone can use your information to apply for a business loan in your name — even if you don’t have a business. Thieves use stolen identities to apply for investment money or an economic injury disaster loan. Of the nearly $1 trillion in distributed support for small businesses, an estimated 5% was lost to fraud.

COVID-19 Paycheck Protection Program (PPP) Loan Fraud

  • Fraudsters have also flocked to the pandemic Paycheck Protection Program (PPP) due to its lax regulations.
  • Because this coronavirus aid program loan didn’t need to be paid back in every circumstance, scammers applied using false or stolen information. 
  • If you’ve been (or know) the victim of PPP fraud or SBA loan fraud, you can report it through the SBA’s website.

Payday Loan Fraud

Of all the loan fraud options available to scammers, a payday loan could be the simplest. 
  • Payday loan applications require very little verification to complete. Many scammers will open multiple fraudulent loans from different lenders in your name. You’ll only know when they start coming to collect. 
  • Scammers also create fraudulent payday loan websites to steal your information and money. 
  • When looking for a lender, make sure they’re using a secure website that won’t steal your banking information. Secure websites will have a lock icon beside the URL and use “https://” instead of “http://”. 
  • You can also check to see if the lender is registered in your state (which is required by law). Contact your state’s bank regulator to make sure they’re legitimate.

Student Loan Fraud

  • There are a few different types of student loan fraud. One is like the other types of identity theft-related fraud in which someone uses your personal data to apply for student loans.
  • But the more common type of student loan fraud is a scam to charge for “help” with a loan. 
  • Scammers commonly charge fees for a student loan modification, consolidation, or even forgiveness. But after you pay, they disappear with your money.
  • The truth is that student debt consolidation is free, and reduction and loan forgiveness is rare except in special circumstances.
  • If you receive a student loan offer, you can verify it through an official .gov website, such as StudentAid.gov, which lists official loan servicers and official loan collection agencies.

Debt Consolidation Scam

Debt consolidation is a legitimate way to help get a handle on repaying your debt while saving you money. However, this also makes them targets for loan fraudsters who will take your money without paying off your debt. If a debt consolidation company tells you to stop contacting your creditors, there’s a good chance they’re trying to scam you.   

If you think you’ve been scammed, here’s what to do next:

  • Get your documents together. Collect any screenshots, emails, or correspondence with the scammer that you think will help your case.
  • Submit a report to the FTC on IdentityTheft.gov. This is your official statement of identity theft and can help protect you from being liable for fraudulent loans. 
  • File a police report with your local law enforcement. This is a necessary step when you know who stole your identity or a financial institution requires a police report.
  • Contact any impacted lenders, financial institutions, or government agencies (such as the SBA). Let them know you’ve filed a complaint or report the problem directly to them. For example, if you’ve been billed for a fraudulent SBA or PPP loan, you can contact the SBA’s Office of Disaster Assistance.
  • Set up a credit freeze or fraud alert. This makes it harder for scammers to open new loans in your name. 
  • Protect yourself from further identity theft. 











eFraud Prevention™, LLC