ASIC issues warning to businesses about loan scam

Published in the Smart Company - March 2014 by Cara Waters

The Australian Securities and Investments Commission has issued a warning over a loan scam which has been sucking in Australian businesses.

The scam involves borrowers being told that before a loan can be advanced they must first forward money for insurance, tax or other payments to a specified personal account or transfer money to an overseas account using Western Union or similar wire services.

But after borrowers make these payments, they never receive the loan.

The corporate regulator has received reports of borrowers sending amounts in excess of $33,000.

ASIC says the scammers, who are believed to be operating from overseas, appear to have hacked the legitimate websites of some small lenders to target consumers.

They have also set up fake websites and internet banner ads offering fake loans.

The fake loan contracts look like legitimate contracts, but are often made in the name of an unregistered business or a company the scammers do not represent.

Borrowers are misled by the inclusion of identifiers, such as Australian credit licence numbers and Australian Company Numbers, belonging to genuine licensees.

ASIC deputy chairman Peter Kell said in a statement that borrowers should never send any upfront payments before receiving the loan.

“Legitimate lenders who are authorised under the credit laws in Australia will collect upfront costs out of the loan disbursements when the loan is advanced, in accordance with the terms of the loan contract,” Kell said.

“They never ask you to transfer money to a third party or an overseas account before a loan is drawn down.”

Janine Cox, senior analyst at Wealth Within, told Smart Company technology is making it easier for scammers to lure unsuspecting Australians into handing over their hard earned cash.

“These people have not only lost money, their personal information will be in the hands of the scammers,” she says.

“The people being targeted may be in search of easy credit, where in a normal lending environment banks might put up hurdles to stop borrowers who cannot afford the loans.”

Cox says in some cases people may simply be looking for loans with lower fees, however, history shows that lending rates in Australia are already at long term lows and therefore borrowers already have access to low, competitive rates.

“Australians are best to do their lending with well-known institutions such as the big four banks, or the well-known second tier banks who are listed on the Australian Stock Exchange,” she says.

Cox advises borrowers need to understand the banking process and their rights.

“The most important point is to always do your research thoroughly no matter what the product is and confirm that the company you are dealing with are who they claim to be,” she says.

“Also check with government related websites such as ASIC, Moneysmart and Consumer Affairs for details.”

She recommends reading loan documents carefully and asking questions so that you understand your obligations and if necessary seek advice from a qualified solicitor.