How to spot and deal with a loan scammer

Times are hard, and you may find yourself in need of some extra money for some emergency or other pressing bills. You don’t have the money so you borrow it. You’ll approach financiers, hat in hand, to ask them to lend you this money.

These financiers are institutions such as banks, micro financiers, Saccos and mobile lending apps. But taking the cash crunch in times of pandemic, they may give you a cold shoulder.

You decide to try individuals – shylocks, loan sharks – who run under the table schemes.

Hurdled amongst this cosy crowd of honest lenders are loan scammers. Wolves in sheep’s clothing. These individuals and institutions are out to prey on your vulnerability and gullibility, they’ll defraud you of your hard-earned money, cause you mental anguish and rob you off your assets.

Be on the alert that you could be dealing with a loan scammer if he:

Does not ask for your borrowing history: He doesn’t have a clue to whether you’ve been servicing your loans in the past or whether you have the ability to service whatever you’re borrowing from them. He doesn’t even question your character. His goal right now is to lock the deal before you change your mind – in fact, he has guaranteed you’ll get your loan in less than 24 hours. A non-scammer will ask for approved bank or Mpesa statements, or ask to speak to third party references.

Requests for your ATM or M-Pesa PIN: Your lender says they need your PIN to verify your personal and financial information with your bank or with Safaricom. Most borrowers share this secret to the scammer without batting an eyelid. Scammers ask for your PIN so they can wipe all your accounts clean. Never share your PIN with your potential lender. If you already have, change it right away and contact all your financial partners to block all possible fraudulent transfers.

Asks for collateral that isn’t commensurate with the loan: You’re borrowing Sh200,000 but your financier asks for a title deed or logbook as collateral. These assets possibly have a current market value of above Sh500,000, so what’s his play? Collateral for such amounts can be your credit history, your payslip or a third party guarantor.

Has no physical address: He operates from the streets of social media or the dark alleys of the World Wide Web. When he asks that you meet to sign documents, he suggests a restaurant or a coffee house of your convenience. A legit regulated lender should have a registered company name and a registered physical address. To ascertain that it is indeed his permanent premises and is not putting up a front, drop by on a random day without calling ahead first.

Asks for payment upfront: Your lender says this payment is to process your loan, to guarantee approval from the credit committee, to show your commitment or to conduct a search with the credit reference bureau. Most lenders do charge a fee for their loans, but this is deducted as a small percentage from the money to be lent to you. (Less than five percent.) Never pay money to get a loan advanced to you.

Sends you poorly written correspondence: You’ll notice grammatical errors in their emails, suspicious Yahoo or Gmail addresses, WhatsApp chats at non-business hours and texts messages from several different lines. They may also prefer to chat through social media direct messaging, from a suspicious dormant account. Correspondence should only be from an official email address with a logo in the email’s signature.

Absurdly balloons the interest on defaulted payments: You’ll see the greed and destructive nature of your lender when you default on monthly payments. He’ll charge a fee on unpaid interest, which is then added to the defaulted principal, and the two are summed up and compounded to the since-adjusted interest rate. It makes no sense. You borrowed Sh300,000 but by the time you settle it 24 months later, you’ll pay more than Sh600,000. Always insist that the lender shares a written agreement, then engage a lawyer to catch such clauses in the fine print.

You’ve been scammed. Now what?

“Loan scamming is a criminal offense under the laws of Kenya. If you’ve fallen prey to a scammer, and have lost money or they’re holding on to your security, lodge a complaint with the relevant authorities – there’s a department within the DCI that handles such financial defrauding. Regulated financiers won’t buy off the loan you took with a scammer.”

Bett Kinyatti is a certified accountant with ACCA and a former financial auditor.