When a person is most in need of financial help is often the time when help is hardest to find. Lenders may back away when they hear about overextended credit cards or missed loan payments. That’s when hard-pressed consumers may be lured by newspaper ads placed by certain loan brokers — ads promising to arrange loans "even if you have a poor credit rating." It may be tempting, but credit experts strongly advise against going this route.
Please review the following information on your rights to protect yourself when doing business with a loan broker.
- must disclose the total amount payable by the consumer to the loan broker and the terms and method of payment.
- are required to give a full refund, within 15 days of the consumer’s demand, of any fees that may have been paid contrary to the act.
- if convicted of an offence, can be fined as individuals up to $50,000 and/or sentenced to two years less a day and, as corporations, can be fined up to $250,000.
- must include specific information in the contract, including:
- name and business address of the loan broker and the name of the potential lender (if known)
- the amount of money to be borrowed.
- if convicted of an offence, can be fined as individuals up to $50,000 and/or sentenced to two years less a day and, as corporations, can be fined up to $250,000.
Other Options
The most lasting solution to money problems is to contact the nearest member agency of the Ontario Association of Credit Counselling Services.
The case of the international loan scam
An individual was charged with defrauding the public after an investigation revealed that this person was victimizing U.S. consumers through ads for loans that never materialized. Consumers who responded to the ads were told that, after paying an insurance fee, they would receive loans. Those who sent the fee received nothing in return but unfulfilled promises.
Records seized as a result of search warrants executed by the ministry revealed that approximately 600 victims lost over $270,000 U.S. over a period of four months in return for promises of $17 billion in loans. The closure of the companies involved prevented further losses.
The individual was sentenced to eight months of imprisonment, followed by 18 months of probation, as well as an order of compensation for $268,193.89 U.S.
The case of the phoney loan broker
A person was convicted of eight charges under the Loan Brokers Act, 1994 and sentenced to 60 days in prison plus two years of probation. In addition, he was fined $400.
Records filed with the ministry show that this individual was carrying on business by placing ads in Quebec and Newfoundland newspapers, offering loans to those who would otherwise have had difficulty obtaining them and inviting them to call a telephone number in Toronto.
The prospective borrowers were told that their loans had been approved, but that a fee was required. They were then instructed to transfer funds payable to the individual who was convicted. No loans were made. No refunds of fees were made following the standard demand.
Loan Broker Statistics
| Complaint Type | Number |
|---|---|
| Written | 115 |
| Phone | 182 |
| Total | 297 |
Inquiries/Complaints:
- Misrepresentations;
- Demands for up-front fees/advance payments;
- Refunds not being made;
- Lack of disclosures on statements.
Services for Business
Services for Individuals
