Consumer Alert: Unscrupulous Online Lenders Scam Borrowers

— -- Authorities are warning of yet another scam targeting online loan applicants. This time it's an advance fee loan scheme involving MortgageTree Lending, a company that is finding plenty of victims online.

Advance fee loan scammers typically request a would-be borrower to make a 10 to 20 percent deposit on the money they want to borrow. MortgageTree Lending is asking its customers to wire money to Canada to cover miscellaneous loan and finance charges, according to authorities.

MortgageTree Lending lists its headquarters and central offices in San Jose, California. However, the local Better Business Bureau says no such offices exist, and a search of California's Department of Corporations turns up no records on MortgageTree Lending of San Jose.

Zach Vander Meeden, public relations director for the San Jose BBB, says complaints against MortgageTree Lending began on September 24. The BBB has received 14 complaints in the past month, and losses to victims total $20,000. Canadian authorities say they've also received several complaints about the firm.

Canadian law enforcement says that advance fee loan scams are finding new life as cash-strapped people with bad credit turn to alternative lenders who advertise online.

"When every traditional lender turns you away, people click onto the Internet and are surprised how easy it is to get a loan," says Louis Robertson, corporal in charge of the criminal intelligence analysis unit for the Royal Canadian Mounted Police.

"Now it seems really stupid to have sent them my money," says Lekiesa Willis, of Hope, Arkansas. Willis says she lost $1630 in advance fees when she was told by MortgageTree Lending that in order to borrow $5000 she would have to wire fees up front.

Willis found MortgageTree Lending in September when she typed in the questions "Where do I get a $5000 personal loan with bad credit?" into the Ask.com search engine. She followed a link in the search results and was taken to a site that prompted her to provide an e-mail address and phone number. The next day Willis says she received a phone call from MortgageTree Lending asking her to fill out a formal loan application and fax it back.

At first she was told to wire $950 as an "insurance premium" and she would get that money back. Days after Willis wired the money, a MortgageTree Lending representative asked her to wire an additional $680 in taxes and fees. She wired the money and waited, and waited.

Willis says it's been hard to get in touch with MortgageTree Lending. When she does, she is told to be patient. Last week, Willis says, a representative of Mortgage Tree Lending called to inform her that her loan had been increased to $9000, and asked her to send an additional $860. Willis refused and asked for a refund. The representative told her it would cost $309 for a refund and it would take three months to have the money mailed to her, she says.

"I feel humiliated and defeated," Willis says. "Worst of all, I still need the money."

MortgageTree Lending representative Arnold Curry says the company has been in business for five years.

"We have not taken any money from customers," Curry says. "I have no knowledge of any customer complaints."

Curry did say that his firm is being investigated by law enforcement officials, but he declined to answer further questions.

Searching the Internet for similar businesses yielded two Web sites that appear to be nearly carbon copies of the MortgageTree Lending site. The site for one of the companies is identical to MortgageTree Lending's, except that the contact information says that ConsumerPlus Credit is based in Jacksonville, Florida.

Vander Meeden says that the BBB in Jacksonville has received 11 complaints from ConsumerPlus Credit customers who paid advance fees for loans and never received them. The third company with an identical Web site, also based in Florida, has not been the target of any complaints.

"I would be surprised if we didn't see some show up on the radar soon," Vander Meeden says of the third company.

A ConsumerPlus Credit representative says the company has no relation with MortgageTree Lending, but declined to comment further. Telephone messages left for the third firm were not returned.

"These people will never see their money again," says Robertson of the Royal Canadian Mounted Police.

Even worse, victims of these scams will likely see their personal information used in identity theft crimes.

Robertson says that advance fee mortgage scams are a lucrative criminal enterprise. Currently Internet-based advance fee loan scams rank number two when it comes to fraud reported to the Canadian Anti-Fraud Call Center's PhoneBusters site.

Here in the U.S., the Federal Trade Commission says advance fee loan scams are consistently in the top ten list for fraud.

"Once people wire the money to a third party it becomes extremely hard to catch the bad guy," says Steve Baker of the FTC.

Law enforcement may have a difficult task catching these con artists, but it's not impossible. New Hampshire's district attorney's office, in conjunction with the U.S. Department of Justice, successfully convicted Michael Wyatt of Plainfield, New Jersey on one count of conspiracy to commit wire fraud. Wyatt was apparently involved in an advance fee loan scheme with Larry and Christopher Stallings of Wautaga, Texas and others. Between 2003 and 2005 the group cheated people out of a total of $2.4 million. They found their victims by advertising on the Internet.

You can file a complaint about a suspected online scam with the Internet Crime Complaint Center, a joint venture of the U.S. Federal Bureau of Investigation and the National White Collar Crime Center. In addition, you can register a complaint with the Better Business Bureau, which will also try to resolve the issue.

But the best advice is to avoid doing business with a company without doing your research first.