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Advance-Fee Credit and Offers to Buy Disability Payments

This guide presents selected U.S. government consumer education from Federal Trade Commission. References to “we” or “us” in the source material refer to the issuing agency. Source dates and links appear below.

What To Know About Advance-Fee Loans

Some companies promise you a loan or credit card regardless of your credit history. But they want you to pay a “processing” or other fee first. Those are scams. Learn the telltale signs.

What Is an Advance-Fee Loan Scam?

Do you need to borrow money to make auto repairs, consolidate credit card debt, or pay your mortgage? In an advance-fee loan scam, scammers promise they’ll get you a loan, credit card, or access to credit. Or they say they’ll put you in touch with a lender who can almost certainly get you those things. No matter your credit history. But first, they say, you must pay up front. The scammer might say the money is a fee for “processing,” “insurance,” an “application,” or something else. But it’s a lie. There is no loan and there is no lender. And if you pay, the scammer and your money will disappear.

Advance-fee loan scams target people who have bad credit or trouble getting a loan for other reasons. The scammers post ads, often online, or call with these so-called deals. Many buy lists of the names of people who have searched or applied online for payday or other loans.

If you're considering a possible lender, know that

  • Legitimate lenders will not promise you a loan or other credit without knowing your credit history, but demand you pay them first.
  • Real lenders can require an application or appraisal fee before they consider your loan application.
  • But nobody legit will tell you that paying a fee guarantees that you’ll get a loan.

Warning Signs of an Advance-Fee Loan Scam

Here are some signs of a possible advance-fee loan scam:

Scammers place ads that say you can get credit regardless of your credit history. They may say things like, “Bad credit? No problem,” “No hassle — guaranteed,” or, “We don’t care about your past. You deserve a loan!”

Banks and other legitimate lenders won’t promise or guarantee you a loan or credit before you apply. They’ll check your credit report, confirm the information in your application, and decide if they think you’ll repay the loan before giving you a firm offer of credit.

Scammers don’t disclose fees before you apply for a loan. Scam lenders might say you’ve been approved for a loan. But then they say you have to pay them before you can get the money. That’s a scam. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”

Scammers call, offering loans or other credit. But it’s illegal for telemarketers to promise you a loan or other credit and ask you to pay for it up front and before they deliver. (The Telemarketing Sales Rule says so.)

Protect Yourself

Not sure if the lender you’re talking with is legitimate? Use these steps to help protect yourself against scammers.

  • Check to see if the lender is registered in your state. Lenders must register where they do business. Contact your state attorney general or banking or financial services regulator to find out if a lender is registered.
  • Search online. Type the company’s name into a search engine with words like “review,” “complaint,” or “scam.” Also, try searching for the company's phone number to see if other people have reported scam calls from that number.
  • Hang up on robocalls. If you pick up the phone and hear a recorded sales pitch, hang up and report it to the FTC. These calls are illegal.
  • Don’t pay for a promise. Whether someone asks you to pay in advance for a credit card, loan offer, debt relief, mortgage assistance, or a job, walk away. No one legitimate will ever ask you to pay for a promise. If they do, it’s a good bet it’s a scam.
  • Get help dealing with debt. You might have more options than you think. Nonprofit organizations in every state offer credit counseling services that often are free or low cost. Learn more about possible options for coping with debt.

What To Do if You Paid a Scammer

Scammers often ask you to pay in ways that make it tough to get your money back. For example, they might ask you to pay by using cryptocurrency, by wiring money through a company like MoneyGram or Western Union, or by putting money on a gift card and then giving them the numbers on the back. No matter how you paid a scammer, the sooner you act, the better. Learn what to do if you paid a scammer.

Report Advance-Fee Loan Scams

If you’ve lost money to an advance-fee loan scam, or have information about the company or scammer who called you, report it at ReportFraud.ftc.gov. When you report these wrongdoers, you help law enforcement stop them and alert others in your community to the scam.

What to Know Before Selling Your Disability Payments

Do you have a legal settlement related to your disability that gives you regular payments? If you need more money in a hurry, you might consider working with a company that offers to give you quick cash in exchange for getting part of your settlement. When you sign over some — or all — of your structured settlement payments to a company in exchange for a lump sum of money, it’s called “factoring.” But you won’t get all the money you would’ve collected over time — and it might leave without a way to pay your bills. Before you agree, know what you’re giving up.

Structured Settlements: What To Know Before You Sell

Do you have a legal settlement related to your disability that gives you regular payments? If you need more money in a hurry, you might consider working with a company that offers to give you quick cash in exchange for getting part of your settlement. When you sign over some — or all — of your structured settlement payments to a company in exchange for a lump sum of money, it’s called “factoring.” But you won’t get all the money you would’ve collected over time — and it might leave without a way to pay your bills. Before you agree, know what you’re giving up.

Alternatives To Selling Your Payments

If you’re considering selling your payments because you’re having trouble paying your bills, factoring your settlement isn’t the only option.

You also may be able to find a counselor to get free or low-cost financial planning advice through the National Foundation for Credit Counseling or the Association for Financial Counseling & Planning Education (AFCPE).

Questions To Ask 

Before you sell your settlement payments, get answers to the following questions:

  • What are the costs? Get all costs and fees in writing. Ask for the percentage or discount rate that the buyer will take to provide you with the lump sum amount. Also ask for a statement of how much money you’d get from them now, versus how much money you’d give up in future settlement payments. This information may not be in the ad or in your contract, so ask for it and get it in writing.
  • How could it affect your taxes? Getting a big lump sum payment for the sale of your structured settlement payments might put you in a higher tax bracket, depending on the circumstances. By contrast, your regular structured settlement payments for your injury or disability are tax-free. Before you sign anything, talk it over with someone you trust or consult with a tax advisor. The IRS's Volunteer Income Tax Assistance (VITA) program offers free basic tax return help. To qualify, you must be a taxpayer who makes $58,000 or less, has a disability, or does not speak English. The Tax Counseling for the Elderly (TCE) program specializes in questions about pensions and retirement-related issues unique to taxpayers who are 60 or older. Check the Taxpayer Advocate Service website to find a VITA or TCE program near you.
  • Can you cancel the transaction? Get a written copy of the factoring company’s cancellation policy to check how long you have to cancel and the steps you must take if you change your mind.
  • What’s your state law? Almost all states (except New Hampshire) require court approval of factoring. So, before the transaction can take place, a judge must decide that it’s in your best interest. If a factoring company offers quick cash for your payments and ways to avoid the court process, they may be luring you into a scam and the lump sum payment may not be real. Dishonest companies also claim to offer independent advice on selling the payments, but instead steer you to individuals or for-profit companies that charge steep fees and lie about how much scrutiny a transaction with them requires.
  • Are there complaints about the company? Your local consumer protection agency or your state attorney general’s office can tell you if any complaints have been filed about the factoring company.

Report Scams 

Where do I report a scam?

If you have a problem with a company that buys disability payments, or if you see a scam, fraud, or bad business practice, report it

Sources and publication details

The federal agency source text is U.S. government work in the public domain. Fynoptic selected, adapted, and formatted it for this guide. No agency endorsement is implied. Follow the linked sources for current program details and the rules applicable to your circumstances.

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