The scam of 2% loan offers

The offer of a loan at an interest rate of only 2% per annum looked suspicious right from the start, mainly because nobody in South Africa would offer a loan at 2% with the prime overdraft rate sitting at 9%.

Secondly, the offer came by way of an unsolicited SMS without any indication of the identity of the sender.

Further information was just a WhatsApp message away, with spelling, punctuation and grammar mistakes removing any doubt that this attractive loan offer was fake.

“Cash Loan Company Limited is a legitimate and well known south Africa and British approved loan lending company based in south Africa and united kingdom,” it proclaimed, yet it uses a Google mail address and does not have a website.

“We offer loans to individuals as well as organizations who have intentions of renovating houses and institutions, debt consolidation, re-financing and also establishment of business outfits. We give out our Loan in USD and GBP, RAND and any currency of your choice.

“Blacklisted can apply, no credit check, debt review or court order can apply. ITC can apply,” according to a lengthy message, signed by a Mr Jackson.

The message asked for my identity number, title, name, surname, telephone number, address, loan amount, loan duration, monthly income, salary date, monthly expenses and occupation.

No check

Jackson was apparently happy with only a partial name, a fake identity number one digit short of a potentially genuine one, my occupation and whatever I told him my salary was. He did not ask me for my employer’s name, nor query why I had neglected to send a list of monthly expenses.

That the loan was approved within 30 minutes serves as proof that Cash Loan Company Limited is not in the business of granting loans.

Within an hour of receiving the first SMS, Jackson broke out a long list of regulations in the National Credit Act (NCA) – the most important of which relate to the need to do a proper credit check on applicants and ensure that they can afford the credit they are offered.

Jackson did not have adequate information to do any credit check, nor did he ask for a copy of a salary slip or proof of identity and address.

He ‘confirmed’ that Cash Loan Company Limited is registered as an authorised lender according to NCA requirements, but could not provide a registration number.

The National Credit Act applies to all credit agreements between consumers and any credit provider in SA, be it a personal loan, store credit, credit card, micro-loan or mortgage bond. Some sections even apply to a pawn shop lending money against valuables.

Any person offering credit to a consumer or lending money must be registered as a credit provider with the National Credit Regulator. Any persons or entities that are not registered may not offer loans or other forms of credit.

The scam

The scam behind the 2% loan offer was predictable. I had to pay an upfront administration fee of R1 550 before I could receive the R10 000 loan.

“Congratulation you have successfully approved, kindly send us your banking details where you want your loan money to be transfer to and also tell us now what is the easy way for you to send the fee now and have it in mind that the fee you pay now will be return back to your loan when transferring the money for you now,” wrote Jackson.

A ‘loan document’ explained the terms of the fee: “In respect of the preparation of security documents, agreements and a solicitor shall act only for the borrower/charger and the remuneration of the solicitor shall be in accordance with the applicable scale fee specified based on the secured or financed amount.

“The processing fee R1 550 shall be paid by the second party to commence due diligence, preparation of security documents, agreements and loan documentation all requested information is provided and satisfied controllable.”

Another WhatsApp message asked that the administration fee be deposited into an FNB bank account belonging to an individual, Nengovhela Livhuwani, rather than a Cash Loan Company bank account, adding “when you are making transfer it’s has to be instant payment”.

FNB

Moneyweb queried the bank account with FNB, outlining the context of the enquiry. A spokesman responded that FNB undertakes to investigate every allegation of fraud in line with its zero-tolerance approach to criminality.

“This is in line with our commitment to ensure that all our bank accounts are used and managed in accordance with all relevant laws. We encourage any victim of suspected fraud to immediately report such incidents through our fraud contact centre or any of our banking channels.

“In addition, we urge the affected party to file a criminal complaint with the appropriate law enforcement authority,” said FNB.

While FNB said that it is unable to disclose information regarding specific bank accounts, it takes immediate action on evidence of criminality.

FNB obviously saw something wrong and closed the account, because Jackson sent new account details for the payment of the administration fee the next morning.

This account belonged to another individual.

Jackson explained in a telephone call that the account particulars changed because “the first agent is not available”. He got upset when called out.

“Since you thought this is a joke, I will make sure I report you same as you said you reported our first bank account,” he wrote in a final message.

Mistakes

It is difficult to comprehend that people fall for scams such as these. Countless mistakes in the messages and documents show clearly that there is something wrong.

Read: Moneyweb reader embarrassed to have fallen for crypto scam

There were big errors in Jackson’s document that was supposed to serve as a loan agreement. For instance, the document states that the loan of R10 000 was supposed to be repaid over one year, totalling 108 monthly instalments of R842.39. Immediately after this incorrect calculation, another states that there are 108 monthly repayments of R108.66 and a final payment of R10 108.66.

Extract

Crooks are probably still making money, despite warnings from banks and other financial institutions, the SA Reserve Bank, the Financial Sector Conduct Authority (FSCA) and consumer organisations.

Scammers wouldn’t put in the hours if they did not make money.

And there are hundreds. In just two days, I received offers of loans from dubious entities and persons pretending to represent well-known financial institutions.

These included a Covid-19 relief loan from Sanlam and loans at low interest rates from Recharge Finance, Everest Finance, Moneyspot Finance, Sanlam Finance (again), CashWorld, DirectAxis and DNR Cash Loans.

A lot of the documentation coming from various different directions looks so similar that it probably comes from the same place. Or can I buy a franchise in the fake loan industry?