Loan scams: An emerging Internet menace

Idaho investigators say to be suspicious of any offers that demand upfront fees, because even financial professionals can get taken.

zkyle@idahostatesman.comApril 30, 2013 

  • Online payday loan scams on the rise

    The Idaho Department of Finance has kept busy tracking a different kind of Web deceit: illegal payday loans.

    The department received 56 complaints concerning payday loans last year and recently issued nine cease and desist orders against online payday lenders, most of which originated from websites hosted out of state.

    Payday loans are often considered predatory because of their high fees - which average about $20 per $100 loaned - and high interest rates. That alone is not illegal, said Michael Larsen, Consumer Finance Bureau chief.

    But Larsen said many complaints detail abusive behavior, such as lenders illegally garnishing wages and pushing through unfinished or abandoned online loan applications.

    "That's when it enters into scam territory," Larsen said. "There are people out there who, if they have your account number, will withdraw from it. They don't care if you never gave the final mouse click to say, 'OK. Let's do this deal.' "

    Often, online solicitors harvest personal information from loan applicants and sell it to other online predators.

    Out of curiosity, a finance department employee submitted his email address to an online payday lender, Larsen said.

    The employee's inbox was barraged by more than 30 payday loan offers in the next two days, he said.

    "Often (the solicitors) are a lead generator, not even a lender," Larsen said. "Your information is an asset. They circulate a message, 'We've got a live one here,' and they sell it."

  • Have you been scammed?

    If you have concerns about upfront loan fees, call the Idaho Attorney General's Office, 334-2400. To report a suspicious payday loan, call the Idaho Department of Finance, 332-8000.

After 30 years in the commercial loan brokering business, Marc Barbe said he should have seen the scam coming when he spoke to Dairld Wurtz, whom he described as a smooth-talking Boise loan broker.

Barbe, who operates SMB Investment Corp. in New Orleans, needed to secure a $1.3 million loan for a client to refinance a shopping center in nearby Baton Rouge.

An Internet search yielded Wurtz and his business, Allied Commercial Partners.

Barbe sent Wurtz payments totaling about $14,000 for various loan fees, appraisals and assessments for the shopping center.

The loan never came through. Barbe and his client never again saw the $14,000.

Barbe said it was the first time he's fallen victim to an old industry trick, the upfront fee racket. He's still kicking himself 16 months later.

"There are many Dairld Wurtzes in the industry," Barbe said. "They know how to get money out of people. They feed a bunch of (lies) to you. Sometimes people bite, hook, line and sinker. I did this time."

Efforts to reach Wurtz were unsuccesful.

The Idaho Attorney General's Office receives dozens of complaints about similar scams each year, said Brett DeLange, chief of the Consumer Protection Division at the Attorney General's Office.

Usually, DeLange's office is limited by jurisdiction. About 80 percent of complaints filed in Idaho are about phony loan providers located outside of the country, mostly in Canada, he said.

Most of the rest originate in other states. The office works with other states on such cases, but its reach is limited.

Wurtz, however, was easy to track down. The office took its first enforcement action on an upfront loan scam since 2010 this month - against Wurtz.

In a settlement, Wurtz agreed to pay three clients, including Barbe, about $20,000 and to stop including illegal upfront fees in conditions for loan agreements. No payments have been made yet.

The action was a victory for the state attorney general, made possible in part because Wurtz operated in Boise - not Boston or Bhutan, DeLange said.

"The problem doesn't seem to be going away," DeLange said. "The action we announced is just the latest manifestation."

Most complaints DeLange receives come from broke Idahoans looking for small loans between $2,000 and $8,000 to get out of jams. The upfront fees typically range from $100 to $2,000.

In 2011, a Boise woman wired more than $1,000 in upfront fees and loan insurance to obtain an $8,000 loan from a Connecticut lender. After not receiving the loan money or a return of what she paid, the woman filed a complaint.

She admitted the online loan seemed fishy, but she needed money quickly.

"This is really nothing but a scam," she said in the complaint. "I'm ashamed that I fell for this. I (was) desperate to get a loan, which did cloud my judgment."

Barbe said he saw red flags waving immediately after he sent money to Wurtz.

He did a simple Google search that turned up suspicious information on Wurtz. That stopped Barbe from sending another $12,000 for a second client's loan, he said.

He isn't confident he or his client will receive the money Wurtz owes.

"I've spoken with others in this situation, and usually, they'll get a payment or two and then never see (the lender) again," Barbe said. "It's a lesson learned."

Every complaint the Idaho Attorney General's Office receives probably indicates many more loan scams that go unreported, DeLange said.

DeLange encourages victims of loan scams to contact his office. He also said borrowers should know that most upfront loan fees are illegal in Idaho and that all loan offers solicited online should be treated skeptically.

"If you ever see (upfront fees and online loan offers) together, that is a warning that you are going to lose your money and not get the service provided," DeLange said. "I'm sure there's a legitimate person out there who does it, but I haven't met them yet."

Zach Kyle: 377-6464

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