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The Honolulu Advertiser
Posted on: Tuesday, October 7, 2003

Beware of advance fee fraud

By Deborah Adamson
Advertiser Staff Writer

Want to pay off your mortgage faster? Need help in getting a loan? Seeking financial aid for college? Whatever your need, there's an "advance fee" scam waiting for you.

"It's the second most popular scam in Hawai'i," said Anne Deschene, president and chief executive of Better Business Bureau Hawai'i. "It's basically outright theft."

Advance fee fraud involves asking victims to pay up-front for a product or service that doesn't materialize or live up to expectations.

Last year, Hawai'i ranked third nationally in the number of consumer complaints for all types of scams, including advance fee schemes, with almost 92 for every 100,000 people, according to the Federal Trade Commission. The District of Columbia was first, followed by Alaska.

"We're what's known as the victim state," Deschene said. "They're preying on a struggling consumer."

Specific numbers for advance fee schemes were not available, but the state Office of Consumer Protection logged 1,729 fraud complaints in 2002. So far this year, Hawai'i has tracked 1,600 — and looks to exceed 2002 levels.

"The rate of complaints is greater than it was last year," said spokesman Steve Levins.

Federal and state figures may vary because some complaints are reported only on the local level.

Advance fee fraud can take a variety of forms. Companies may charge a fee to help homeowners make semimonthly mortgage payments to pay off a loan faster. Homeowners can do this themselves for free if their lenders don't impose prepayment penalties. Companies charging advance fees may be pulling off a scam if the promised services don't materialize.

Another type of advance fee fraud involves the promise of guaranteed approval for a major credit card carrying a low interest rate and a high credit limit, even if consumers have poor credit.

Instead, what consumers get is information on how to apply for a major credit card or a $300-limit charge card good only for purchases from an obscure catalog with products starting at $200, said FTC spokeswoman Brenda Mack.

Still another type of scam preys on budget-conscious parents who are lured by guarantees of snagging a scholarship through special search techniques.

The FTC has received complaints nationwide from students and parents who did not get the information they expected.

Hawai'i residents lately have been victimized by foreign lotteries and sweepstakes, Deschene said. The solicitors ask for an up-front fee to release the lottery winnings, but victims never see the money.

Sometimes would-be victims are saved before they get fleeced.

In one recent case, a Honolulu bank clerk became concerned when an elderly customer began withdrawing thousands of dollars to send abroad, Deschene said. The senior had been lured into a foreign lottery, and the withdrawal was stopped in time.

It's better to prevent being victimized, Deschene said, because it is rare for consumers to get their money back. Once the money is sent off, "kiss your money goodbye," she said.

Scams pulled on Hawai'i residents have been getting more polished and sophisticated. It's up to the consumer to differentiate between legitimate offers and frauds, she said.

Here are some tips to follow:

  • Check complaints against the company on the Better Business Bureau Hawaii Web site at www.hawaii.bbb.org. You also can call 536-6956 on O'ahu or (877) 222-6551 from the Neighbor Islands.

If there's no information on the business, that's a red flag, according to the BBB.

  • Find out how long the company has been in business. Get references.
  • Be skeptical of deals that guarantee approval of anything from credit cards to student loans or promise a high return on your money in a short period of time.
  • To report fraud or log a complaint, contact the state at 587-3222.

Reach Deborah Adamson at dadamson@honoluluadvertiser .com or 525-8088.