Money Bag with Dollar symbol, isolated on white

Banks and Lender Scams and Complaints

by Miles Morley, Legal Assistant

This is part five of a recurring series on the most common types of fraud reported in the Consumer Sentinel Network’s 2014 Data Book for the State of Michigan.

Money Bag with Dollar symbol, isolated on whiteBanks and Lender Scams accounted for five percent of all complaints from Michigan Residents and a total of 3,566 complaints in the Consumer Sentinel Network’s 2014 Data Book. These types of scams are defined as deceptive or predatory mortgage lending practices; problems with modification of mortgage terms; miscellaneous customer service and account issues with bank or credit union products, including payday loans, student loans, auto title loans, fees and overdraft charges; and other finance company lending products, services and practices; etc.

A common lending scam is the advance-fee loan. An advance-fee loan scam usually occurs when a party offers a loan or assistance in getting a loan, but requires you to pay upfront. Many of these loans will promise you a loan or credit card before processing an application or regardless of credit history. Often they will state that you have received approval, but a sum of money has to be paid for “processing,” “insurance,” “paperwork,” or “handling.” Normal lenders may charge these fees, but they do not require upfront payment as they will collect them from the distribution of the loan. Many scammers will also try to create a sense of urgency, while legitimate lenders will allow you time to shop around. Lenders in Michigan are required to be licensed by the Department of Insurance and Financial Services.

Foreclosure rescue fraud is a growing area of lender fraud that is sweeping the country after the collapse of the housing bubble. The most common of which ask a homeowner to pay money upfront, redirect their mortgage payments, stop making their loan payments, and/or sign over the title to their property. Scammers will often claim that a victim is eligible for a government program to reduce their mortgage payments or refinance their loan. Many scammers will instruct the victim to cease payments on their loan to gain modification or relief. This often leads the homeowner falling further behind on their mortgage and negative reports on their credit report. Victims of these scams lost an average of $3,248 at a time when they were in greatest need of assistance. The best defense to these scams is to research the programs or groups. Many scammers will create a website or reference an existing government program, but those that don’t will be eliminated quickly. You can also contact a housing counselor, who will assist in answering questions about these government programs, how they work, and their legitimacy.

If you have any questions or concerns about being the victim of a scam, contact the Legal Hotline for Michigan Seniors at 800.347.5297 or visit http://www.elderlawofmi.org/legal.


Miles MorleyMiles Morley is a legal assistant and website administrator at Elder Law of Michigan, and has been a member of the Elder Law team since August 2014.

Miles holds a Bachelor of Science in Computer Information Systems from Baker College of Owosso, Bachelor of Science in Political Science from Lake Superior State University, and graduated with his Juris Doctorate in 2013 from Michigan State University College of Law.

Before joining the Elder Law of Michigan team, he served as an intern at the United States Coast Guard Headquarters . As a legal assistant at ELM, Miles provides legal advice, under the supervision of our hotline attorneys, to Michigan Seniors on a wide-variety of areas, including Medicare/Medicaid. As a website administrator at ELM, Miles is responsible for technology and programming projects.

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